US employment and labour market trends in March 2023

America’s March labour report to be the last released before the US Federal Reserve meets again to discuss future interest rates.

By Ahmed Azzam | @3zzamous | 7 April 2023

  • Wage growth is slowing, and the Good Friday job report is expected show the smallest annual increase in average hourly earnings since July 2021

  • According to ADP data, US private sector employment increased by 145,000 jobs in March 2023, despite job openings falling below 10 million in February

  • The tight labour market may limit the recession's severity but could impede the Federal Reserve's reaction to negative GDP prints

Private sector jobs increased in March

Private sector employment in the United States rose by 145,000 jobs in March, according to the latest ADP National Employment Report. The data, which draws on payroll information from more than 25 million US employees, also revealed a year-over-year pay increase of 6.9%.

The report provides insight into the current state of the labour market and the employment trends. It shows the total change in private employment for the current month and weekly job data from the previous month. ADP's pay measure offers a unique view of the earnings of nearly 10 million employees over a 12-month period.

However, a report from the US Labour Department reveals that job openings fell below 10 million in February for the first time in almost two years. The survey found that available positions stood at 9.93 million, down by 632,000 from January's downwardly revised figure. The drop may indicate that the Federal Reserve's efforts to slow down the labour market may be having an effect.

The pace of US hiring is expected to have continued at a moderate rate in March, with non-farm payrolls likely to have risen by 236,000 after employers added 311,000 jobs in February.

Wage growth slows, smallest increase in hourly earnings expected

The US economy has seen employment growth surpass expectations for 11 consecutive months, the longest period since data began being collected in 1998.

However, while demand for workers remains high, wage growth appears to be slowing. The upcoming Good Friday jobs report is expected to show a 4.3% rise in average hourly earnings in March from the previous year. This would be the smallest annual increase since July 2021.

Federal Reserve considering interest rate hikes

The March jobs report is the last one to be released before Federal Reserve policymakers gather on May 2-3 to determine whether they will continue to raise their benchmark interest rate.

While underlying inflationary pressures remain high, the cumulative effect of the central bank's year-long interest rate hike campaign on credit conditions is also being taken into account. This is especially relevant considering recent bank failures, which have led to lenders tightening loan standards.

The supply and demand of labour are gradually reaching a better balance, albeit at a slow pace. This persistent tightness in the labour market is expected to limit the severity of the recession predicted for the second half of the year. However, it may also impede the Federal Reserve's reaction to negative GDP prints, which runs counter to current expectations based on fed funds futures and OIS pricing.

Dollar index technical analysis suggests bearish potential

The March jobs report will be released on Good Friday when the metals, commodities and stock markets are closed, so the US dollar will be the main mover when the news is released.

In the technical analysis of the dollar index, the falling wedge pattern suggests a potential for bearish depth towards 100.50 and 100.00 levels if the price support at 101.00 is broken.

However, a positive jobs report and the prospect of further interest rate hikes could drive the index up to 101.65 and 102.00 levels if the price support remains intact.

Chart shows US Dollar index on the weekly time frame