Guosheng Macro: Jobs in the United States show signs of improvement in March, but underlying worries remain.

Event: On April 3, at 20:30 Beijing time, the US Department of Labor released the March non-farm payroll data. Key Points: The situation in Iran has lasted for over a month without any signs of a quick ceasefire, indicating that high oil prices will continue for some time, undoubtedly causing more serious impacts on the economy, policies, and markets. With the US labor market further loosening and the economic impact of high oil prices gradually becoming evident, the phenomenon of "stagflation" will gradually emerge. The possibility of the US economy entering a recession with a rate hike, and the possibility of a second round of inflation with a rate cut, as the Fed's actions remain limited, the real change in policy space will likely occur after a change in the Fed chairman. Continued warning: facing the possible scenario of "rising oil prices - increasing inflation - Fed pausing rate cuts or even hiking rates - increasing possibility of stagflation or recession," current asset prices may not be properly priced, and the possibility of further deep adjustments should be guarded against. In the short term, keep a close eye on oil prices and developments in the Iran situation. 1. In March, the US added 178,000 non-farm jobs, far exceeding the expected 65,000. The March unemployment rate was 4.3%, lower than the expected and previous 4.4%. 2. Looking at industries, the main contribution came from the education and health services sector (+91,000), with the healthcare industry adding 76,000 jobs. The negative contributions mainly came from the government sector (-8,000) and the finance industry (-15,000). 3. After the non-farm data was released, US stocks fell, the US dollar rose, US bond yields rose, and rate cut expectations cooled. Interest rate futures imply expectations of a rate hike in September, October, and even slightly in 2026, with the probability of a rate cut by the end of 2026 dropping from 27.4% to 18.6%. 4. How to understand this data? Focus on four points: - Corporate survey: the strong rebound in non-farm employment was mainly due to the easing of weather and strikes, and the model exaggerated the extent of the recovery. - Household survey: the unexpected decline in the unemployment rate was mainly due to a significant decrease in the number of unemployed and the total labor force. The labor force participation rate was lower than expected, falling to a new low since the end of 2021, suggesting that the quality of the decline in the unemployment rate this month is not high. - Survey timing: the employment survey was conducted in the middle of the month, reflecting only the impact of the US-Iran conflict in the first two weeks before the survey. The full impact of the Iran situation on "stagflation" may not have fully manifested, and the actual impact on the labor market needs to be gradually verified with Q2 data. - Overall picture: the current US labor market is in a "tight balance" state (the decrease in short-term labor supply offsets the weakening labor demand, hence the moderate performance of the unemployment rate). The risk of a rise in the unemployment rate remains in the presence of ongoing disturbances in the Middle East. 5. After the March interest rate meeting and with the evolution of the Middle East situation, the market initially traded rate hike expectations, which gradually corrected after Powell's Harvard speech and Trump's ceasefire signals. At present, with the release of this relatively stable non-farm report and recent Trump's "final ultimatum" to Iran, combined with persistent high oil prices and the stickiness of inflation, the Fed is less likely to cut rates in the short term. Risk Warning: Risks related to the US economy and inflation, Fed monetary policy, geopolitical conflicts, etc., continue to exceed expectations. This article is selected from the WeChat public account "Bear Garden Observation", GMTEight editor: Chen Yufeng.