The Long Weekend
Good Friday often produces awkward market calendars. This year it may produce something worse. At 8:30 in Washington on Friday 3 April, the March non-farm payrolls report will be published into a half-open market. US equities will be shut. The Treasury market will close at noon. London will then remain closed through Easter Monday. By the time British investors return on Tuesday, New York will already have had a full session to decide what the number means.
That matters because the labour market no longer looks robust enough to absorb much disappointment. February payrolls fell by 92,000. Unemployment rose to 4.4 per cent. January was revised down to 126,000. More importantly, the benchmark revision earlier this year cut the March 2025 level of payroll employment by 898,000 on a seasonally adjusted basis. The pattern is now familiar. The first print tends to flatter. The truth emerges later, and usually lower.
Consensus expects a modest rebound in March, with payrolls rising by around 60,000. Even that may prove optimistic. Job openings fell to 6.88mn in February. Hiring dropped to 4.85mn. The hires rate fell to 3.1 per cent, the lowest since March 2020. Jay Powell recently described the labour market as close to a “zero-employment growth equilibrium”. That sounds technical. It means the jobs machine is barely moving.
The market will focus on the headline payrolls number, but the unemployment rate may matter more. A rise to 4.5 per cent would not look dramatic in isolation. But it would reinforce the sense that the labour market is drifting into the zone where recession indicators begin to stir. In a stalled labour market, even a superficially decent payrolls print may offer little reassurance, especially if revisions continue to move only one way.
Under normal conditions, weaker jobs data would be good news for Treasuries. Investors would conclude that the Federal Reserve had more room to cut. But these are not normal conditions. Brent is back above $108 a barrel. The 10-year Treasury yield is around 4.38 per cent. The dollar is firm. Volatility has picked up. The old relationship between soft data and easier policy no longer looks automatic when oil is tightening financial conditions already.
Powell’s answer, for now, is to wait. He has said policy is well positioned and that the Fed can afford to see how the war feeds through to inflation and growth. That is understandable. Central banks cannot pump more crude through Hormuz. But it also means tomorrow’s payrolls report may not deliver the comfort markets usually seek from weaker data. A soft number would not simply point to lower rates. It would also point to a weaker economy and a central bank less free to respond.
That is where Kevin Warsh enters the frame. His confirmation hearing is approaching, which means markets are starting to think not just about the next payrolls print, but about the next Fed. If March payrolls disappoint, if unemployment ticks higher, and if revisions again take the shine off the initial release, investors will be left with an uncomfortable conclusion. The labour market is weaker than advertised, but the Fed may be less able than usual to ride to the rescue.
That is what makes this long weekend dangerous. Not that markets will be closed for part of it. But that when they reopen, they may have to confront the possibility that weak data is no longer reliably good news for markets.
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