The March jobs report surpassed all expectations as the Bureau of Labor Statistics (BLS) reported a 931,000 increase in jobs for the month. In addition to this, there were an additional 150,000 positive revisions to November and December, meaning that more than a million jobs were added.
Not surprisingly, the stock market had a big move higher - climbing 1.5% to close at new, all-time highs. Bond yields opened higher, with the 10Y Treasury yield opening higher by 60 basis points but then gave up these gains in the ensuing days. The muted reaction in rates to the strong job news could be an indication that the rally in interest rates is due to a pause in the coming months.
Inside the Numbers
The unemployment rate fell to 6%. The largest gains were distributed across many industries which bodes well for the duration of the recovery such as leisure and hospitality, public and private education, and construction. Construction jobs came back due to bouncing back from poor weather in many parts of the country. The gains in leisure and hospitality and education are a reflection of the reopening that is happening in many parts of the country which should only continue along with vaccinations.
Thus, it's likely that jobs reports in future months remain strong at a mid to high, six-digit clip. If anything, many companies could face a situation in which hiring becomes a challenge especially in sectors where workers could have left the industry like restaurants, retail, and tourism.
Another positive indication was that the number of people on temporary layoff dropped by 203,000 to 2 million last month. This figure was at 18 million in April 2020. The labor participation rate remains depressed at 61.5%. Despite the strong report, average hourly earnings remained unchanged.
Stock Market Impact
The stock market had a positive reaction to the jobs report as it indicates that the economy is doing better than forecast by many analysts. As a result of these figures, many Wall Street banks upgraded their GDP forecasts for the second quarter.
Often, such an outlier economic data point could have a negative impact on the markets as it would likely mean the Federal Reserve may raise rates sooner. However, the Fed has indicated that it won't do so. Additionally, this is unlikely to affect the Biden administration's plans for its $2.5 billion infrastructure package which means the market is free to rally on good news.