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Instant View: U.S. March payrolls surpass expectations, joblessness rate drops

NEW YORK (Reuters) - U.S. employers hired more workers than expected in March, spurred by increased vaccinations and more pandemic relief money from the government, cementing expectations that an economic boom was underway.

FILE PHOTO: People line up outside Kentucky Career Center prior to its opening to find assistance with their unemployment claims in Frankfort, Kentucky, U.S. June 18, 2020. REUTERS/Bryan Woolston

Nonfarm payrolls surged by 916,000 jobs last month, the Labor Department said on Friday. That was be the biggest gain since last August. Data for February was revised higher to show 468,000 jobs created instead of the previously reported 379,000.

Economists polled by Reuters had forecast payrolls increasing by 647,000 jobs in March. The unemployment rate fell to 6.0% last month from 6.2% in February.

Story Labor Dept release

MARKET REACTION:

STOCKS: The U.S. stock market is closed for Good Friday. S&P e-mini futures extended gains and were up 0.43%.

BONDS: Yields on benchmark 10-year notes rose to 1.7072%. Two-year Treasury yields rose to 0.1782%

FOREX: The dollar index firmed and was up 0.16%

COMMENTS:

PATRICK LEARY, CHIEF MARKET STRATEGIST, HEAD OF TRADING, INCAPITAL, MINNEAPOLIS

“The big thing is that the market was looking for this... Most market participants were looking for a number in this zone.

“It doesn’t change the narrative and that’s why you’re not seeing a giant reaction from markets. It was largely priced in.

“The data is good, that’s true. However, what that also means is that we maybe won’t need to do as much stimulus or we won’t need to be as accommodative for as long, things are going to recover quicker. Sometimes it’s one of those things where good news is bad news and bad news is good news.

“Service sector numbers were a big component of this report. In fact if you look at the report here and you look at the average hourly earnings, hourly earnings actually ticked down... And that’s because you’re bringing lower wage workers into the report. That’s good news, it’s the part of the economy we’ve been waiting to recover.”

RUSSELL PRICE, CHIEF ECONOMIST, AMERIPRISE FINANCIAL SERVICES INC, TROY, MICHIGAN

“This is the first of what is likely to be several very strong jobs reports over the next few months.

“When you include the upward revisions for January and February, the true gain in total employment was over 1 million, 1.07 million to be exact. The jobs gained in leisure and hospitality in March were not as strong as we expected, so that leaves further upside to be had, which also contributes to a very good outlook for the next few months.

“As bars, restaurants, theaters, casinos, sports and music venues, it’s all those things that people have been denied over the last year that they are itching to get back out and enjoy as restrictions are lifted and people feel safe. Through February it accounted for 43% of the jobs that were still missing out of the private sector. So that is where businesses are going to reopen, people are going to be clamoring to try to take advantage of those activities once again. So they’re going have to hire at a very strong rate over the next several months.

“The outlook looks very good. In my mind the biggest constraint could be the ability of the supply side of the economy to fulfill consumer wishes.”

EDWARD MOYA, SENIOR MARKET ANALYST, OANDA, NEW YORK (email)

“The hiring spree has officially started in the US and Wall Street knows that it will take several months of monstrous job gains to trigger the taper tantrum. The equity market party is in the early stages as the US will likely add between 500,000 and a million jobs over the next few months.”

STEVEN RICCHIUTO, U.S. CHIEF ECONOMIST, MIZUHO SECURITIES USA, NEW YORK

“Everyone was expecting a big number, it was a little bit bigger than some, but it’s not as big as some of the outlandish numbers that were being forecast. You throw $2.9 trillion at an economy in a very short period of time and you’re going to get these kinds of impacts.

“What does it mean at the end of the day? The jobless rate is still 6%. The Fed is not going to be changing anything, re quantitative easing, until they get to 4% and they’re going to be looking for higher inflation.

“What this number is telling you is the economy’s bouncing back, but it’s not producing the things that are going to change the direction of monetary policy. It comes down to what will be the eventual direction in the curve be? The answer is it will be steeper. But can we push through the 1.77% level against the backdrop of a weaker hourly earnings number and an unemployment rate that’s still a year away? The deflation camp in the world we’ll continue to look at this and say the U.S. is falling into the same trap that Europe is in and that Japan was in in the 1990s and that no matter what you throw at it, it can’t get away from itself. Japan had very, very strong growth numbers, Japan had very, very good employment numbers, but they really weren’t able to push inflation to new levels. You are going to be in an environment here which we’re going to test the 1.77% level (in 10-year Treasuries), but I’m not sure it’s going to break on this number.

“This takes away from the immediacy of having to pass the next $2.25 trillion worth of stimulus. You got 916,000 workers that were hired and the jobless rate is low. But it becomes harder and harder to convince people we got to go out spend another $2.25 trillion dollars. It takes the steam away from the fiscal policy but leaves right in the same monetary policy.”

PAUL ASHWORTH, CHIEF U.S. ECONOMIST, CAPITAL ECONOMICS, TORONTO

“Overall, particular segments of the labor market - like leisure and hospitality and education - remain weak because of the ongoing restrictions. But the opposite is true in many other sectors, with job openings soaring and voluntary quit rates already back to pre-pandemic levels. The upshot is that an acceleration in wage growth in those better-placed sectors could add to the upward pressure on prices this year.”

JJ KINAHAN, CHIEF MARKET STRATEGIST, TD AMERITRADE, CHICAGO

“It’s a great number. But I don’t get too hung up on one number. The important thing is that the employment trend is pointing in the right direction. We’re not where we were pre-March last year. We’re still down 5.5% from our peak, but we continue to make great progress. And this particular report is one of the best progress reports we’ve had.”

STEVE RICK, CHIEF ECONOMIST, CUNA MUTUAL GROUP, MADISON, WISCONSIN (email)

“It is a really great sign that this jobs report was a solid hit. Between rapid vaccine rollout and the positive outlook on reopening efforts, we are gaining momentum on the economic recovery front. While it could still take a while to for the labor market to return to abnormally low pre-COVID conditions of 3.5% unemployment, we could reach normal unemployment levels much sooner.”

Compliled by the global Finance & Markets Breaking News team

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