Market Overview

The U.S. employment report for March will be released on Friday, April 3. Given that the February report showed a surprisingly weak performance, this release is drawing significant attention.

　First, let’s review the previous report. The February employment report showed a month-over-month decline of 92,000 in nonfarm payrolls (NFP), falling well short of the market forecast of 50,000 and January’s figure of 126,000 (revised down from the initial estimate of 130,000). The unemployment rate rose to 4.4% from 4.3% in January. The market had expected it to remain flat at 4.3%.

　While it is not uncommon for NFP figures to deviate somewhat from forecasts, this result still gives the impression of weakness. Although factors such as strikes by some healthcare workers and inclement weather played a role, the numbers remain weak even after accounting for these factors. Consequently, this result has shattered the previous perception that, despite concerns about the U.S. economy, the job market remained resilient.

A breakdown of the NFP figures reveals broadly weak results, with the exception of the financial sector, which added 10,000 jobs. The goods-producing sector saw a decline of 25,000 jobs. Manufacturing, which had returned to positive territory in January with a gain of 5,000 jobs—its first increase in 14 months—slipped back into negative territory with a loss of 12,000 jobs.

Additionally, the construction sector deteriorated from a gain of 48,000 jobs in January to a loss of 11,000 jobs, partly due to inclement weather. The services sector saw a sharp deterioration, falling to -61,000 from +95,000 in January. This is believed to be largely due to a significant decline in the education and healthcare sector—which typically underpins the overall figures—to -34,000 from +129,000 in January. Factors contributing to this include an estimated 37,000-person decline due to strikes and a rebound effect from January’s unusually strong figures.

Furthermore, the leisure and hospitality sector, which often supports employment during economic booms, saw a decline of 27,000 jobs. This was driven by a lackluster performance in the food service sector, which alone employs 12.33 million people and recorded a loss of 29,700 jobs. Weakness also persisted in the information, transportation, and warehousing sectors, which have been showing notably poor results recently.

The ADP employment report is expected to show an increase of 40,000, a slight slowdown from the previous reading of 63,000. Retail sales are projected to rise 0.5% month-over-month, with core retail sales (excluding automobiles) up 0.3% month-over-month, marking an improvement from January’s figures of -0.2% and 0.0%, respectively. Even amid the disappointing results of the February employment report, if personal consumption comes in as robust as expected, it is likely to provide a sense of relief to the market.

The ISM Manufacturing PMI came in at 52.4, a slight slowdown from January’s 52.6, but still exceeded the market forecast of 51.5. The employment sub-index stood at 48.8, falling below the 50-point threshold that separates expansion from contraction, but it improved from January’s 48.1. This month’s reading is expected to be 52.3, roughly the same level. Close attention should also be paid to the employment sub-index. While not directly related to the calculation of the ISM Manufacturing PMI (Note), a notable trend among the survey items was the rise in input prices. It jumped 11.5 points from 59.0 in January to 70.5, reaching its highest level since 2022. While there are concerns about rising prices due to the conflict in Iran, this indicates that input prices were already rising as early as February, prior to those events. A further increase to 73.8 is expected this time. If the figure rises even further beyond expectations, caution is warranted.