The U.S. added more jobs than expected in March. But markets are focused on tariffs, which will have a much bigger impact on mortgage rates: Rates are falling today, but the future is uncertain.
Today’s jobs report was stronger than expected: 228,000 U.S. jobs were added in March, and the unemployment rate stayed essentially flat. But this data is lagged; it reflects labor-market activity from early March. Markets will discard this report as old news because the fallout from President Trump’s April 2 tariff announcement is much more significant. Rates will fall further today not because of this data, but because China’s retaliatory tariffs are causing the stock market to fall even more.
The numbers: There were 228,000 jobs created in March (vs. 135,000 expected), and the unemployment rate edged up only marginally, to 4.15% from 4.14%. That shows that the labor market was strong heading into this week’s tariff announcement despite DOGE cuts and some tariff headwinds. Economists expected some weakness in federal government payrolls to show up in this report, but the federal government only shed 4,000 jobs in March. It was also expected that private sector hiring might slow down, given the back and forth on tariffs in February and March, but that did not materialize. On a six-month average basis, the economy has been adding 180,000 jobs per month, a solid clip. The only segment showing weakness are industries that rely heavily on unauthorized immigrants, which has been shedding jobs.
But fallout from the new tariff policy will have a much more significant impact on the economy than the jobs report. This jobs data was collected weeks before President Trump announced sweeping changes to US tariff policy. Given that, the main role of jobs data now is to help the Fed calibrate the likelihood of a recession driven by the trade war. Overnight, the market was betting on five rate cuts this year, with the first coming as early as the next meeting in May. This was because of increased recession odds after China announced 34% tariffs on U.S.-made goods and investors decided to bet that the Fed will ignore rising inflation to rescue the economy. But this strong jobs report has investors pulling back to four rate cuts, with the first in June, because the Fed now has more reason to stand by rather than jump in with “insurance cuts” to ward off an impending recession.
Impact on housing market: mortgage rates will fall, at least temporarily. Mortgage rates will fall further today despite the strong jobs report because of China’s retaliatory tariffs announced overnight. But much uncertainty and volatility lies ahead. The future for mortgage rates depends on whether the inflationary or the recessionary effects of tariffs dominate, and how the Fed chooses to respond. Some clues will emerge as we see how various countries choose to respond, and we hear from Fed Chair Powell later this morning.
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