Stocks end the day higher even as blowout jobs report pushes some Fed officials to consider another rate hike

Stocks rallied Friday after the latest jobs report came in piping hot.

The Dow rose 307 points, or 0.8%, after climbing more than 400 points at the day’s highs. The S&P 500 gained 1.1% and the Nasdaq Composite added 1.2%. Still, all three major indexes ended the week lower, starting the second quarter of the year on a sour note.

While the latest jobs report supports the idea that the US economy is holding strong against interest rates at a 23-year high and could avoid a recession, it also puts into question when the Federal Reserve will begin its long-awaited rate cuts.

The US economy added 303,000 jobs last month, according to data released Friday by the Labor Department. That blew past expectations for 205,000 job gains, according to FactSet consensus estimates.

“This jobs report should indicate that there is no rush and no need for the Fed to save the labor market, especially if it will just reignite inflation down the road,” said Mike Sanders, head of fixed income at Madison Investments.

As stocks settle after the trading day, levels might change slightly.

Friday’s jobs report was mostly positive: Employment gains were a robust 303,000 in March and the jobless rate dipped to 3.8%, extending a historic streak of unemployment below 4%.

However, the report also included a continuation of a more concerning streak: Black unemployment rose for the third consecutive month, rising sharply to 6.4% from 5.6% in March. It’s the highest that rate’s been since August 2022. The unemployment rate for Black women rose 1.1 percentage points, to 5.9%.

As of March, the Black unemployment rate is now nearly double that of the White jobless rate of 3.4%.

The household survey that feeds into the jobs report is typically much more volatile than the establishment survey, so it’s possible that this leap may be exaggerated; however, it could be a worrying sign, Elise Gould, senior economist for the Economic Policy Institute, wrote Friday.

An analysis from the Bureau of Labor Statistics showed that the increase in Black unemployment “is more likely signal than noise,” wrote Bill Adams, chief economist for Comerica Bank, in a note.

“In historical business cycles, Black workers have been the last to be hired during the expansion and first fired during the contraction, so an increase in the Black unemployment rate is eye-catching to forecasters,” he wrote.

“But the rest of the jobs report shows the labor market to be in quite good shape, so the data point is unlikely to be a sign of broader weakness this time,” Adams said.

The 303,000 jobs added in March brings up the 2024 average to 276,333 jobs per month. That’s more than what was seen last year (average of 251,000 jobs) and well above pre-pandemic averages (183,000 from 2010-2019; 125,000 jobs from 1939-2019).

It does bring up the question: How much of this growth is sustainable?

Prior to the pandemic, it was thought that adding between 60,000 and 100,000 jobs each month would be enough to keep up with population growth (and account for the rising Boomer retirements).

However, a report last month from the Brookings Institution speculated that the sustainable employment growth range should be much higher — to the tune of 160,000 and 200,000 jobs per month.

“Thanks to stronger immigration flows, the economy’s capacity has been increased,” Greg Daco, chief economist at EY-Parthenon, told CNN.

As of March, the number of employed foreign-born workers climbed to a fresh record high of 31.1 million, according to BLS data. Foreign-born workers’ labor force participation rate was 65.9% last month. Comparatively, the participation rate for native-born workers was 62%.

“[Net immigration growth] is adding to the pool of American workers, and those immigrants are bringing some productivity gains with them in technological innovation and refinements,” Brett House, professional practice professor at the Columbia Business School, told CNN. “That’s an important piece of data in an election year, when immigration is under a lot of scrutiny … The United States unambiguously is benefiting from an increase in net immigration.”

The onset of the Covid-19 pandemic quickly devastated a major economic engine: The US leisure and hospitality industry saw its employment quickly halved, losing more than 8 million jobs in the span of two months.

The lockdowns, the waves of variants and the shifts in technology as well as Americans’ migration, working and spending patterns cast doubt on when — or if — those jobs would return.

It took four years.

In March, the leisure and hospitality industry added an estimated 49,000 jobs, bringing overall employment to 16.905 million and finally surpassing February 2020 levels.

Leisure and hospitality, along with health care and government, have been the primary drivers of job growth during the past year. For leisure and hospitality, it has been a virtuous cycle: The service sector has benefited greatly from experience-seeking consumers who have been spending heartily in part because of a strong labor market and wage gains that are not being completely eroded by inflation.

It’s been almost a year since the Federal Reserve raised interest rates. For a while, Fed officials were signaling the current level of interest rates, the highest in 23 years, was sufficient to rein in inflation and it could become appropriate to consider cutting rates.

But now, some Fed officials are floating the possibility of hiking interest rates.

“While it is not my baseline outlook, I continue to see the risk that at a future meeting we may need to increase the policy rate further, should progress on inflation stall or even reverse,” Fed Gov. Michelle Bowman said Friday.

The progress in inflation over the past year came from supply chain improvements, a higher supply of workers due in part to immigration and lower energy prices, she said.

“It is unclear whether further supply-side improvements will continue to lower inflation,” Bowman said Friday, speaking at an event hosted by the Manhattan Institute. At the same time, she’s concerned that geopolitical conflicts and fiscal spending could put more pressure on prices.

Bowman’s remarks echo those of Minneapolis Fed President Neel Kashkari one day earlier. He said rate hikes are “certainly not off the table.” But he said they aren’t likely. Kashkari is not voting on monetary policy decisions this year.

Most Fed officials do expect to eventually cut rates this cycle — but will need to see more convincing data that shows inflation is on the path to the Fed’s 2% goal. Strong jobs data doesn’t necessarily work against that, given inflation has been coming down concurrently, Fed Chair Jerome Powell said earlier in the week. But it’s certainly something officials are monitoring.

New inflation data is set to be released next week.

Stocks rallied Friday midday following a brutal week of trading, as investors parsed the latest jobs report.

The Dow rose above the 39,000 level again Friday, gaining 422 points, or 1.1%. The S&P 500 gained 1.3% and the Nasdaq Composite added 1.6%. Still, all three major indexes are on track to end the week lower, after tumbling on worries that the Federal Reserve will cut interest rates later than expected.

“It’s hard to find anything wrong with the March jobs report,” wrote Steve Wyett, chief investment strategist at BOK Financial, in a Friday note. “The strong labor market should continue to support the US consumer and keep the Fed on hold for now. We still expect the next move from the Fed to be to lower rates, but there is little sense of urgency at the moment.”

CNN’s Fear & Greed Index, which measures seven barometers of market sentiment, rose to a “greed” reading from “neutral” at the prior close.

Treasury yields climbed after fresh data showed the US economy added a staggering 303,000 jobs in March. The yield on the 10-year Treasury note rose to 4.37%.

Dallas Federal Reserve President Lorie Logan joined the growing bloc of Fed officials questioning whether rate cuts are appropriate at all this year.

“I believe it’s much too soon to think about cutting interest rates,” Logan said Friday, just hours after the blowout jobs report was released.

A chief concern of hers is that inflation will get stuck at a level above the Fed’s 2% target, she said. Recent inflation readings have put her on high alert for that possibility, she added, though it is not her baseline expectation.

Most Fed officials expect to cut rates three times this year, according to projections from last month’s meeting. But the timing for the first of those cuts is incredibly uncertain given inflation is still above 2% and the labor market is remarkably strong. That’s why officials aren’t in a rush to cut rates.

On Thursday, Minneapolis Fed President Neel Kashkari rattled US markets when he said: “If we continue to see inflation moving sideways, then that would make me question whether we need to do those rate cuts at all.” However, he still thinks the central bank will cut rates twice this year. Neither Kashkari nor Logan are voting members of the Fed’s rate-setting committee this year.

Atlanta Fed President Raphael Bostic, who is a voting member, has said he believes the central bank should cut once this year.

Acting Labor Secretary Julie Su told CNN Friday that the March jobs report shows that the US is the “strongest economy in the world.”

“The president described it himself, it’s the strongest economy in the world. And the numbers certainly tell that story,” Su said. “So the idea here is that overall a strong economy is good for everybody. But under President Biden’s policies, they’re especially good for working people and that’s exactly what we want to see.”

The economy is a critical issue for the president as he seeks a second term. A new poll from the Wall Street Journal asked voters in the seven swing states who they think would best handle the economy, and former president Donald Trump leads Biden by double digits in all seven. 

Pressed on why Biden’s economic approval numbers have not improved along with the strong jobs numbers, Su said that it’s a sign that “we have more work to do.”

“I think that consumer sentiment is also changing, but we also take it as a sign that we have more work to do and will continue to do it until every American feels that sense of security that the president talks about. We want a good job not just to be a good paycheck, but also to provide some breathing room,” Su told CNN’s Sara Sidner.

The use of artificial intelligence will reduce the number of workers at thousands of companies over the next five years, according to a global survey of C-suite executives published Friday.

The wide-ranging poll of 2,000 executives, conducted by Swiss staffing firm Adecco Group in collaboration with research firm Oxford Economics, showed that 41% of them expect to employ fewer people because of the technology.

The survey’s results provide another indication of the potential for AI and generative AI — which can create original text, images and other content in response to prompts from users — to revolutionize employment and the way people work.

Read more here.

Like many economists, Richmond Federal Reserve President Tom Barkin was taken aback by the March jobs report.

But he happily accepted the latest data, which showed that US employers added 303,000 new jobs and the unemployment rate fell slightly to 3.8% from 3.9%.

“That’s a quite strong jobs report,” Barkin, a voting member of the Fed’s rate-setting committee this year, said Friday at a conference in Baltimore. “It does raise the question of whether we’re seeing a real shift in the economic outlook, or whether we’re just seeing bumps along the way.”

Barkin seems to be suggesting that he and his colleagues may need to readjust their forecasts of the economy based on the much-higher-than-expected job gains last month.

The strong jobs data over the past few years is paramount to the economy’s ability to withstand a recession, Barkin added.

Behind the scenes, a practice known as “labor hoarding,” where employers keep employees on the payroll to ensure they’re properly staffed after the economy recovers from a potential recession, has also helped keep the unemployment rate low, he said. “That’s good for the economy and also obviously good for those workers.”

US stocks opened higher on Friday after four consecutive down days as traders digested a red-hot jobs report.

The blue chip Dow gained 23 points, or 0.1%. The S&P 500 was up 0.2% and the tech-heavy Nasdaq Composite was 0.4% higher.

The strong opening comes just one day after the Dow notched its worst session in over a year.

All three major indexes are tracking toward a losing week as increasing tensions in the Middle East and Federal Reserve policy worry traders.

“Continued hot job growth will reinforce the Fed’s cautious approach towards rate cuts as some Fed officials will likely see job growth as still too hot for comfort,” said EY senior economist Lydia Boussour in a note Friday morning. Still, she added, “the details of the March jobs report offered welcome signs that labor demand and supply are better balanced with the labor force participation rate rebounding and wage growth easing.”

Construction added 39,000 jobs in March, about double the average monthly gain of 19,000 over the prior 12 months.

Latino workers make up about one third of America’s construction industry, according to the Bureau of Labor Statistics, a huge overrepresentation considering they make up just 19% of the overall American population and 17.6% of its workforce. More than two-thirds of Hispanic construction workers in America are foreign born.

The unemployment rate for Hispanics decreased to 4.5% in March from 5% in February. Compared to a year ago, the Hispanic unemployment rate decreased slightly from 4.6%.

“Construction had a notable uptick in job growth, growing at more than twice its pace from the past year, despite some loud calls not too long ago that construction employment would suffer in the face of high interest rates,” said Nick Bunker in a note Friday. “The large contribution from nonresidential specialty trade contractors points toward a possible explanation for construction’s resilience: Elevated factory construction activity spurred by recent federal policy.”

The US job market is on fire.

And yet… Americans continue to pooh-pooh the economy. In a February CNN poll, nearly half of people surveyed said they believe the economy remains in a recession. This past week, a Wall Street Journal poll showed Americans’ approval rating of the US economy was underwater by a stunning 31 percentage points. That’s a big risk to President Joe Biden’s reelection campaign.

The reason: stubborn inflation. Although price hikes have subsided dramatically over the past year, costs still sting. Gas prices, emblazoned on signs all around towns and cities and highways, are on the rise again, with a national average marching toward $3.60, the highest in six months. Grocery prices have remained frustratingly high, and dining out still far outpaces overall inflation, even as the surge in overall food inflation has subsided.

In the Journal’s poll, 74% of respondents said inflation progress was headed in the wrong direction over the past year.

That’s not a problem that the Fed can easily solve. Historically high interest rates have punished the economy, sending mortgage rates near 7% and practically freezing the housing market. Inflation has come down to near-normal levels from a four-decade high.

But Americans keep spending and employers keep hiring, and costs are not going to come down, even as inflation — the pace of price increases — slows. So, every time folks go shopping and see the alarmingly big receipt, they’ll get a reminder of frustrating inflation, souring their view of what’s a remarkably strong US economy.

President Joe Biden touted March’s jobs report Friday, saying it “marks a milestone in America’s comeback.”

“Today’s report marks a milestone in America’s comeback,” Biden said in a statement released by the White House Friday. “Three years ago, I inherited an economy on the brink. With today’s report of 303,000 new jobs in March, we have passed the milestone of 15 million jobs created since I took office. That’s 15 million more people who have the dignity and respect that comes with a paycheck.”

The economy remains a critical issue for the president as he seeks reelection. In his State of the Union address, the president vowed to raise taxes on corporations and lower everyday costs, including junk fees and prescription drug prices.

The US economy added a whopping 303,000 jobs in March, continuing the labor market’s scorching-hot streak. Here’s what Wall Street has to say.

Job growth in March was driven by industries such as health care, which added 72,300 jobs; government (+71,000 jobs); leisure and hospitality (+49,000 jobs); and construction (+39,000 jobs).

March’s jobs report, which showed that employers hired a whopping 303,000 new workers, bolsters the Federal Reserve’s argument for being patient when it comes to cutting interest rates.

At the same time, inflation hasn’t been budging as much as central bankers would like. On that front though, the jobs report provided a positive development: slower wage growth. On a monthly basis, average hourly earnings increased by 0.3% to $34.69. That was a slight bump from February. But on an annual basis, the pace of wage growth slowed to 4.1% from 4.3% in February.

Fed officials pay close attention to this because faster wage growth can usher in higher overall prices since it means consumers have more money to spend.

Still, it likely won’t be enough to convince the Fed that it’s appropriate to lower rates from their current 23-year high. The concern remains that it would invite more inflation and, since the labor market continues to remain strong, they’re unlikely to want to chance it.

Stock futures were higher Friday morning, even after a red-hot jobs report that showed the US economy added 303,000 positions in March, nearly 100,000 more than analysts had expected. The unemployment rate fell to 3.8% from 3.9%.

While low unemployment signals a resilient economy, traders worry that strong economic data could spur the Federal Reserve to keep interest rates higher for longer. A robust labor market means that consumers have more spending power. That could add to inflation.

Friday morning’s rebound comes after a disastrous week for Wall Street. The Dow is currently tracking toward its worst week in over a year.

“The stock market rose 10% during the first quarter, which is an extremely impressive gain, and it’s not surprising to see stock market turbulence after such a gain,” said Glen Smith, chief investment officer at GDS Wealth Management.

Job growth remains plentiful at American businesses.

Employers added 303,000 jobs in March and the unemployment rate fell to 3.8%, according to the Bureau of Labor Statistics.

The total far surpasses economists’ expectations of 205,000, according to FactSet consensus estimates. The jobless rate had been projected to fall from 3.9% to 3.8%.

US stock futures were on the rise Friday morning, but it’s been a bad week for markets in general.

The Dow plunged more than 500 points on Thursday, notching its worst day in more than a year and its fourth losing session in a row. All three major indexes are now tracking toward a negative week.

As of Thursday afternoon, the blue-chip Dow is down about 3% for the week, while the S&P 500 and tech-heavy Nasdaq Composite are about 2% lower.

The S&P 500 is currently on course for its worst weekly performance since October.

A catalyst for the selloff has been rising tensions in the Middle East. Oil prices spiked by almost 3% yesterday on news that Israel was preparing for a possible attack by Iran. That, in turn, stoked fears of inflation.

A number of Federal Reserve officials also made hawkish statements this week. Minneapolis Fed President Kashkari said that if “we continue to see inflation move sideways, then that would make me question whether we needed to do those rate cuts at all.”

Earnings season kicks off next week with quarterly updates from Delta Air Lines, Citigroup, BlackRock, JPMorgan Chase and Wells Fargo. Investors are hoping it will help bring back this year’s banner rally.

Analysts polled by FactSet expect first-quarter earnings of S&P 500 companies to grow 3.1% from the prior year. That would mark the third straight quarter of earnings growth. Full-year profits are expected to swell about 10.7%.

All three major US indexes have notched repeated record highs this year after a gangbusters 2023, despite hot inflation data and hawkish Federal Reserve chatter forcing Wall Street to pull back its expectations for six interest rate cuts this year to three.

Some traders credit strong fourth-quarter corporate earnings and the resilient economy for fueling optimism that the US will avoid a recession and in turn the market’s continued surge.

But stocks began tumbling just after notching their best start to the year since 2019. The S&P 500 has fallen 2% this week after hot inflation data and warnings from Fed officials raised concerns that long-awaited rate cuts could come later than expected. Elevated bond yields and spiking oil prices are also weighing on stocks.

The first-quarter earnings season could get the stock rally chugging along again, some investors say.

Read more here.

Futures were slightly higher Friday morning after tumbling on Thursday ahead of the jobs report. Dow futures rose by about 0.2% to 38,995, the S&P 500 was mostly flat at 5,212, and Nasdaq futures were up by 0.2%.

On Thursday, the Dow Jones Industrial Average slumped 530 points, or 1.4%, after swinging 800 points during the day. The blue-chip index closed below the 39,000 level for the first time since mid-March.

The S&P 500 fell 1.2% and the Nasdaq Composite slid 1.4%.

Minneapolis Federal Reserve President Neel Kashkari said Thursday that it’s possible the central bank won’t cut rates this year if inflation remains persistent, spooking investors already concerned that the Fed could delay paring back rates.

That adds to what’s already been a rough start to the second quarter, after stocks notched their best beginning to the year since 2019. The S&P 500 has declined 2% for the week after paring back some of its losses on Wednesday. The 10-year US Treasury yield on Tuesday leapt to its highest level since last November. Gold and oil prices are rising.

Economists predict the US economy added 200,000 jobs last month, according to FactSet consensus estimates.

That would be down from the 275,000 workers added in February and the 229,000 added in January.

The unemployment rate is expected to fall to 3.8% in March, but it’s “very foreseeable” that the jobless rate could reach 4%, said Michael Strain, the director of economic policy studies at the American Enterprise Institute.

That would signal workers are starting to “lose some of their extremely strong leverage in the labor market,” said Aaron Sojourner, a labor economist at the W.E. Upjohn Institute for Employment Research.

Federal Reserve officials will likely be paying close attention to the pace of wage growth. That’s because faster wage growth can usher in higher overall prices since it means consumers have more money to spend.

Last month it slowed slightly, and economists are expecting that progress to continue.

Here’s what five investors and economists have their eye on ahead of the latest jobs report.

Fewer people are quitting their jobs: BLS data released Tuesday showed that February’s quits rate (voluntary separations as a percentage of employment) remained low. Higher quit rates typically correlate to higher wage and price inflation pressures.

At the same time, layoff activity hasn’t spiked.

Last month, the number of job cuts announced by US-based firms held mostly steady with the activity in March 2023, according to new data released Thursday from outplacement and research firm Challenger, Gray & Christmas.

Layoff announcements picked up last month by about 7%. However, that’s an increase of just 0.7% year on year, according to Challenger.

Through the first quarter of this year, layoff announcements are down 5% from the first three months of 2023.

“Many companies appear to be reverting to a ‘do more with less’ approach,” Andy Challenger, senior vice president of Challenger, Gray & Christmas, said in a statement. “While technology continues to lead all industries so far this year, several industries, including energy and industrial manufacturing, are cutting more jobs this year than last.”

The latest weekly jobless claims released Thursday by the Department of Labor released showed that initial applications for unemployment benefits climbed to a nine-week high of 221,000, slightly above expectations. However, the number of people who were already collecting unemployment benefits fell by 19,000 to 1.79 million.

Federal Reserve Chair Jerome Powell — like many of his colleagues — thought the unemployment rate would spike after the central bank began its aggressive fight against inflation two years ago. But he couldn’t be happier to have been proven wrong.

Now the question is how much longer the labor market will continue to stay as strong as it has.

Powell said he’s expecting more “labor market rebalancing,” Powell said at an event hosted by Standford University on Wednesday. By that, he mainly means fewer job openings, which puts less pressure on employers to raise wages. At the same time, he believes the labor market will remain strong as the Fed aims to get inflation down to its 2% target.

However, he acknowledged that recent monthly job gains have “come in higher than expected.” That’s one of the reasons the central bank is putting off rate cuts.

Demand for workers in the US picked up slightly in February in a sign that the job market remains on strong footing, though layoffs also ticked up that month.

There were a seasonally adjusted 8.8 million job openings in February, a notch higher than the prior month’s downwardly revised 8.74 million, the Labor Department reported Tuesday. That was roughly in line with economists’ expectations. The number of available jobs remains well above pre-pandemic levels, but is down from a record high of 12.2 million in March 2022.

Openings soared the most in finance and insurance; state and local government excluding education; and arts, entertainment and recreation. Meanwhile, job vacancies dropped sharply in information and federal government.

However, while labor demand remains solid, the report also showed some possible signs of a loosening job market. Layoffs rose to 1.72 million from 1.6 million. For the past three years, layoffs have hovered below pre-pandemic levels, but as of February, they were above the lowest point in 2019.

The number of hires rose slightly in February to 5.8 million from 5.7 million.

The ratio of job openings to the number of unemployed people seeking work, a measure of labor market tightness often cited by Federal Reserve Chair Jerome Powell, fell to 1.36 in February from January’s 1.43. That’s well below the ratio of 2:1 in March 2022, the highest on record, and shows that demand and supply in the job market has become much more balanced over the past two years.