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​​​​Robust Job Growth Expected in March Employment Report

​​The strength of the US economy continues to give investors hope of more stock market gains, while also making them worry that the Fed will swerve any rate cuts this year.​

Chart Source: Bloomberg

​​​Forecasters Eye 200,000 New Jobs

​Forecasters expect an official government report on Friday to show the labour market added 200,000 jobs in March. That would be above the pre-pandemic average monthly job growth, and mark the 39th month in a row the economy has added jobs.

​Labour Market Resilience Despite Fed Rate Hikes

​The labour market is still going strong despite the Federal Reserve's (Fed) campaign of anti-inflation interest rate hikes. The resilient job growth underscores the broader economy's continued expansion even as the central bank has aggressively raised borrowing costs to cool demand.

​Implications for Federal Reserve Policy Path

​Job growth far above or below expectations could influence the Fed's decision on when to cut interest rates. A stronger-than-expected report may nudge policymakers to keep rates higher for longer to ensure inflation pressures ease. Conversely, a weaker number could bolster expectations for rate cuts later this year as economic growth slows.

​While the forecasted 200,000 gain would be robust, it represents a slowdown from February's blockbuster 311,000 job additions. Economists will closely analyse data on wage growth and labour force participation for signals on how tight the job market remains and potential inflation pressures.

​What does this mean for the Fed?

​It is important to remember that, in the end, good job growth is good for the stock market. Investors ultimately want stock prices to rise, and a growing economy, where Americans can find new jobs and higher salaries, is the way to keep stock prices rising.

​The short- to medium-term worry is that this strength will mean that the Fed is less inclined to cut interest rates. Stock markets around the globe have done very well since November 2023, and part of this has been down to the hope that the Fed will cut rates this year.

​The real truth is of course that earnings growth ultimately drives stock markets, and with earnings season just around the corner it will be time to take a break from the endless ‘will they, won’t they’ discussion about the Fed and rate cuts, and focus on how well American companies are faring. Payrolls, for the moment, are not something to worry about.

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