March US Non-farm Payroll Review: Employment support Fed continues to watch tariff impact.

Industrial issued a research report stating that non-farm employment in the United States in March increased by 228,000 people, exceeding expectations. The decrease in federal government employment narrowed, while state and local government employment increased significantly. Recently, the Federal Reserve believes that the balance of supply and demand in the labor market is weakening the pressure on inflation. Under the tariff policy, market focus on inflation may shift more towards commodities and inflation expectations. Looking ahead, the second quarter will be a key period for economic and inflation data, with concerns about the risk of "stagnation" potentially fluctuating with data, combined with Trump's policies being easily reversed, the Fed's decision-making and expectations are expected to remain volatile. The main points of the report are as follows: Non-farm employment increased by 228,000, despite revisions to previous data, the service industry and government remain resilient. (1) Employment in the private sector service industry strengthened. The education and healthcare industries added 77,000 jobs, remaining the largest contributors; possibly influenced by a rebound following extreme weather conditions, the leisure and hospitality industry reversed the trend of job losses in January and February, adding 43,000 jobs in March; after the end of strikes, the retail industry saw employment growth rebounding from negative growth in February to 24,000 new jobs, with the average employment in the retail industry in the past three months still significantly higher than before the pandemic; the "other services" category added 19,000 jobs, and industries such as maintenance, personal care, etc., showed a rise in employment. (2) The decrease in federal government employment narrowed, while state and local government employment increased significantly. Despite the ongoing downsizing process in federal government, the decline in federal government employment slowed down and the number of initial unemployment claims for federal employees remained high, coupled with the recovery of state and local government employment, resulting in 19,000 new jobs in the government sector. The increase in low-end labor supply pushed up the unemployment rate. Although employment growth reached 228,000 people according to the CES business survey, the unemployment rate unexpectedly rose according to the CPS household survey. The decrease in the number of people laid off or ending temporary work, and those who resigned voluntarily, led to a decrease in the unemployment rate, mainly due to a significant increase in the number of people newly entering the labor force, who face difficulties in finding jobs quickly, thereby pushing up the unemployment rate. The increase in labor participation rate reflects the phenomenon of unemployment in this group, with an increase in the participation rate among young people (16-24 years old) and Asian and Hispanic population, possibly indicating a willingness of low-end labor force to re-enter employment. Wage growth has slowed down, but market concerns about inflation may shift towards commodities and inflation expectations. Hourly wage growth in March decreased both month-on-month and year-on-year, with temporary rebounds in demand and wage increases in retail and leisure hotel industries; while wage growth in industries such as information, education, healthcare, other services, utilities, construction, etc., decreased. Overall, wage growth remains above pre-pandemic levels, but the Federal Reserve believes that the balance of supply and demand in the labor market is weakening the pressure on inflation. Under the tariff policy, market focus on inflation may shift more towards commodities and inflation expectations. A global trade war is looming, but the resilience of the U.S. economy keeps the Federal Reserve steady, intensifying risk aversion in the market. Trump's announcement on April 2nd of comprehensive tariffs exceeded expectations, and on April 4th, China announced retaliatory measures against the U.S., initiating a phase of global trade disputes. After the announcement of reciprocal tariffs, the U.S. dollar and U.S. bond rates quickly fell due to recession concerns, affecting copper, oil, and leading to a surge in safe-haven assets such as the Japanese yen and gold. Although the release of non-farm data led to a slight rebound in the U.S. dollar and U.S. bond rates, on the one hand, the stability of "hard data" weakened the market's expectations of a rate cut by the Federal Reserve to support the economy, and on the other hand, the extreme uncertainty of Trump's policies continues to be the main contradiction leading to a sharp decline in market risk appetite, causing a significant decline in U.S. stocks. It is worth noting that yesterday's dip in gold, and the rise in the Japanese yen (related to unwinding carry trades) may reflect a potential liquidity squeeze in assets such as U.S. stocks following the sell-off. Despite Trump calling for a rate cut, Powell stated that there is sufficient preparation to wait for more definitive results, maintaining stability in monetary policy statements. Global market volatility is not over, and safe-haven assets remain the preferred choice. Currently, reciprocal tariffs are pending enforcement, and negotiations may continue next week depending on the situation. Looking ahead, the second quarter will be a critical period for economic and inflation data, with concerns about the risk of "stagnation" potentially fluctuating with data, combined with Trump's policies being easily reversed. The Fed's decision-making and expectations are expected to remain volatile, and the state of high volatility and risk aversion in global markets has not ended, with risks of continued fluctuation and downward risks in global stock markets, making safe-haven assets such as gold a preferred choice. Risk Warning The unexpected cooling of the U.S. job market poses downside risks to the U.S. economy.