The March employment data exceeded expectations, with only slight revisions to January and February, reflecting that the labor market remains strong with few layoffs, but the data is backward-looking, and future momentum is uncertain, Jefferies said in a note Friday.
Chief US Economist, Thomas Simons, said March typically sees strong job growth, especially in construction, leisure, hospitality, healthcare, and education sectors. The hiring pace in March 2025 follows this trend, though the overall job market is still experiencing fewer job gains during strong months and fewer job cuts during weak months, signaling a "no hire/no fire" situation.
He added that while the headline data appear solid for now, uncertainties related to tariffs and economic policies could slow job growth in the coming months, even though the labor market is entering this uncertain period in a relatively strong position. "Momentum can change on a dime, especially when policy expectations shift drastically, but this data shows we have a very long way to go between current conditions and those consistent with a recession."
The analyst said the Federal Reserve has been patient with policy changes, with no immediate need for rate adjustments based on current conditions. However, increasing uncertainty may lead to an easing bias in H2. Job growth in March was mainly driven by sectors like healthcare, construction, retail, and leisure, with more modest gains in manufacturing and professional services. Although March's data showed improvement due to better weather, the trend suggests fewer people are working full-time due to weather-related disruptions. The Fed's approach to policy has been "reactive," with further rate cuts likely later in 2025.
The labor market remains strong, but growth may slow as uncertainty and demographic factors, such as aging populations, continue to influence participation rates, Simons added.
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