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Macro Monthly Report/US Employment Situation Analysis: Why Is US Employment Still Surprising?

Short-Term Focus on Job Growth

Key Findings:
Employees' part-time employment has increased, while full-time positions have declined, indicating a shift in job quality and supporting the labor market through secondary employment channels. Concurrently, the U6 unemployment rate (inclusive of underemployed and marginally attached workers) rose in the past six months. Newly created jobs concentrated in non-cyclical sectors such as education, healthcare, government, and leisure and hospitality, which accounted for about 60% of total new non-farm employment from Q1. These sectors surged following an extended recovery, particularly government jobs took much longer to recover post-pandemic than the private sector. Rising immigration demands public sector jobs to improve services, further contributing to employment in this domain. Strong service consumption continues to boost leisure and hospitality—both supply-shortage and demand-strong sectors—leading to significant job growth.

Recent Non-Farm Payrolls:
March 2024 data reveals an impressive 303k new jobs—surpassing market expectations by a considerable margin. This follows upward revisions in January/February's initial reports, with a net+220k job gains, though initial drops remain substantial. ADP data confirms an active recruitment environment. The persistent rise in employment points to a resilient job market. Labor force participation is up slightly at 62.7%, though still shy of pre-pandemic levels at 63.3%. The unemployment rate dropped to 3.8%—remaining near historic lows despite a 0.2pct monthly improvement.

Wage Growth and Inflation:
Average hourly earnings tracked a surprising trend: monthly growth returned to a positive 0.4%, but annual growth softened to 4.1%—the slowest pace since last year's summer. This relative stabilization suggests service inflation is cooling and aligns with Fed's inflation-targeting goals. However, year-over-year adjustments in employers' wages remain sticky. Real wage growth, after stripping out inflation, has recently turned positive. This translates to higher actual purchasing power and reinforcing consumer spending power.

Policy Outlook & Market Reaction:
The "strong-at-a-local-level" job market might, at first glance, suggest pulling back. However, with unprecedentedly low unemployment rates, structural job gaps are slowly shrinking, signaling a labor market that's cooling at a glacial pace. The Fed's dovish shift post-employment data hasn't followed entirely—interest rate expectations defied expectations, pointing to an unchanged path mean-reversion timeline. Still, the market has mixed signals, with both job market strength and wage moderation offering a softened baseline for policy actions.

Risk Assessment & Outlook:
Is the cooling pace on job growth deflationary enough? Or are labor shortages driving wages higher than their generated output is worth? Persistently strong jobs data keeps the door open for 2024 rate cuts already trimmed above 50%. Meanwhile, real compensation gains and labor demand gaps suggest the ROE from keeping rates high is diminishing. The market doesn't have clear, binary reading signals—collapsing service inflation compounds wage stickiness. The Fed likely weighs the depth of incoming inflation data more heavily than jobs—hence the mixed market reaction. Policymakers now hope "modest cooling in activity" pans out without triggering recession fears. The key pillar: wages' continued moderation raises the bar for policy action.

Why Is US Employment Still Surprising?——Analysis of March 2024 Non-Farm Payrolls

Key Highlights

This article analyzes the factors driving employment growth, changes in unemployment rates and labor participation, shifts in job distribution across industries, fluctuations in wage trends, and implications for Federal Reserve policy. It was found that the U.S. employment market continues to perform robustly but with signs of structural stagnation. Furthermore, a dovish shift in market expectations emerged after the latest non-farm payrolls data, but this is still undercut by wage stickiness and the path-dependency of monetary policy.