US Nonfarm Payrolls preview

The March payrolls figure seems very stale and out of date after this week’s tariff announcements. Friday’s payrolls data will not be impacted by Trump’s extreme tariffs, we will need to wait for the coming months to see how this could impact the hard US economic data, which has only moderated slightly, compared to a sharp fall in the soft economic data since the start of 2025. Either way, payrolls are always worth watching.

The market is expecting no major surprises from the March report, with 140k non-farm jobs expected to be created, the unemployment rate is expected to remain stable at 4.1%, and average hourly earnings are expected to have grown by 4% YoY, within the long-term range.

Strong March Payrolls could quickly disappear

However, some analysts are expecting a large upside surprise to the March payrolls number. This is down to a rebound in jobs growth after storms and fires distorted the January and February jobs figures, front running of tariffs and some reversals of government grant freezes that may have boosted US jobs growth last month.  Although DOGE job losses are expected to weigh on jobs growth later this year, Elon Musk’s reported departure from DOGE could mean that Federal job cuts are less than expected in the coming months. Added to this, some of DOGE’s prior cuts to Federal department workforces and budgets have been rescinded by the courts. The Federal government is a relatively small employer compared to local and state governments. Thus, even if Federal worker numbers fall in March, overall government jobs could still rise if state governments continue to hire workers.

The market reaction to the US labour market report has been muted in recent months, due to the distortions to the data caused by weather events. The average response in the last 12 months in the 30-minutes after the payrolls report has been released is mildly positive for the S&P 500. The biggest positive move after a payrolls report was for the February 2025 report and the October 2024 report. The S&P 500 rose by 0.4% on both occasions, 30 minutes after payrolls were released.

The largest move to the downside came after the July report was released in early August, which saw a large negative surprise and spurred a larger sell off in risk assets in the following days and weeks. The moves in the dollar have been negligible after payroll reports in recent months. This suggests that other factors are driving the dollar right now, for example Trump’s tariff programme and concerns about US trade relations, rather than US economic data.

The market impact

The dollar had one of its largest downside moves in a decade vs. the euro and the pound on Thursday. Although gains have been tempered in early trading on Friday, the dollar still looks  weak. Likewise, the S&P 500 had a 5-standard deviation move on Thursday, based on daily moves from the past year. Thus, we could see some much-needed stabilization in global stock markets, which may look through this month’s payrolls, bar a shock reading  to the downside for payrolls, or to the upside for the unemployment rate.

Bear markets are starting to creep up on US small cap stocks and the Nasdaq. The Russell 2000 is down nearly 15% YTD, along with the Nikkei. The Russel 2000 is down nearly 20% since its November peak. This comes at  a time when the hard economic data in the US is still relatively strong, and the US economy is expected to have created 140k jobs last month. Fears about the impact of President Trump’s reciprocal tariffs have completely changed the outlook for US stocks, with small and mid-cap stocks underperforming the broader blue-chip index. Thus, we do not think that a stronger than expected payrolls report later on Friday will be enough to spur a sustainable recovery in global risk assets or in US assets.