Investing.com - The U.S. economy added more jobs than expected last month, signaling that the labor market remains relatively robust, which could provide the Federal Reserve with more headroom to delay the cutting of interest rate until later this year.
Nonfarm payrolls rose by 303,000 in March, above the revised lower 270,000 seen in February, according to data from the Labor Department's Bureau of Labor Statistics. Economists had called for a reading of 212,000.
Average hourly earnings grew by 0.3% month-on-month, as expected, rising from a revised 0.2% in January. The unemployment rate, meanwhile, fell to 3.8% from 3.9% the prior month, remaining below 4% for 26 straight months, the longest such stretch since the late 1960s.
In March, job gains centered mainly around health care, government and construction, while employment in leisure and hospitality returned to its pre-pandemic February 2020 level.
Employment was little changed in retail trade, with gains in general merchandise retailers largely offset by job losses in building material and garden equipment and supplies dealers and in automotive parts and tire retailers.
The strong jobs report cooled bets on a soon rather than later rate cut, with just 51% of traders expecting a June cut, down from 60% a day earlier.
While the data weaken conviction that the labor market is likely to take a big hit from higher for longer interest rates, some on Wall Street aren't ready to throw in the towel on June a rate cut.
"We still see enough weakness in the household survey and elsewhere to leave our base case for a more significant uptick in unemployment later this year," Citi said in a note as it continued to back a June rate cut.
"Fed officials viewing stronger jobs data as good news on the supply side, the Fed remains on track to begin cuts in June," Citi added.
Still, even if the labor market doesn't take a significant hit, Citi argues, that Fed Chair Jerome Chair Powell and colleagues have already noted that this a strong jobs market "can be sustained without raising inflationary risk" as more people neter the labor market.
The Fed stuck to its view of three rate cuts this year at its March meeting, raising hopes for a June cut, but a number of officials, including Chair Jerome Powell, have since stressed the need for the U.S. central bank to continue to study more data before a rate-cutting cycle is started.
Citi, however, expects the Fed to deliver 5 rate cuts this year, but said if the job market holds up better-than-expected than the Fed is likely to cut rates three times.
(Peter Nurse contributed to this article).