Friday’s job report is expected to show slower employment growth for March, but will likely still reflect the resilient labor market reported at the beginning of the year.

Economists are expecting to see around 200,000 jobs added in March’s report, a significant drop from the 275,000 jobs the U.S. Labor Department recorded in February. Forecasters don’t expect the unemployment rate to change significantly from where it stands at 3.9%.

The number of American payrolls has grown significantly in 2024, but the hundreds of thousands of jobs added have not been enough to drive the unemployment rate down significantly as immigration has risen and women are reentering the workforce post-pandemic. Investors are hoping March’s report will reflect slower wage growth to keep inflation down and push the Federal Reserve to cut interest rates soon.  

“There’s a really paradoxical thing going on here,” said Guy Berger, director of economic research at the Burning Glass Institute. “I think the market certainly did not necessarily have very strong feelings about the job number, but they might have opinions on the wage data that comes out.”

The labor market’s resilience through 2024 has surprised economists who predicted a slowdown in response to the Fed’s interest rate hikes of 2022 and 2023. But instead of a recession, inflation slowed and the job market thrived simultaneously, with 290,000 and 220,000 jobs added in December and January, respectively.

Now, investors are eagerly awaiting for the Fed to cut interest rates, so wage growth in tomorrow’s report could have a direct impact on markets. 

While a higher paycheck is great news for individual workers, employers giving raises pass those added costs on to the customer. This could raise consumer prices overall and delay the Fed’s inflation goal of 2% – a target Fed Chair Jerome Powell hopes to reach before cutting rates. 

Forecasters will also keep an eye on the unemployment rate, which slightly ticked up last month despite strong job growth. The consensus among economists is that it will remain stagnant, but the disconnect between strong payroll gains reported by employers and a jump in unemployment has proven to be an interesting economic story, according to Wells Fargo senior economist Michael Pugliese.

“I think it’ll be interesting to see if that corrects or widens further tomorrow,” he said.

Strong immigration in the U.S. has partly contributed to that disconnect, accounting for about 20% of the job growth seen recently, ZipRecruiter chief economist Julia Pollak said. Immigrants and women entering the workforce recently are essential for longer term labor market growth, as an aging population retires out of the workforce at higher rates. 

“We have a lot more people in the labor market to pull from, so that means you have a bigger supply of labor,” Pollak said. “And companies who are demanding labor have more people to pick from so they can hire those people and you won’t generate faster inflation through the labor market.”

The Fed is expecting the unemployment rate to reach 4% by the end of the year. But if the rate rises quickly and materially, it could push the Fed to cut rates sooner rather than later, Conference Board chief economist Dana Peterson said.

Four main industries have been leading job growth thus far: health care, government, nonresidential construction, and leisure and hospitality. 

“If you look at all the other industries, they really haven’t been adding a lot,” Peterson said. “So how large the payroll number is going to be, probably, very heavily dependent on those three to four industries.”

Despite sour economic sentiment, the labor market has remained strong, which is likely to reflect in the March jobs report. 

“The economy is doing pretty well,” Pugliese said. “It’s certainly sort of exceeding expectations relative to even a handful of months ago.”

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