US: Labor Market Continues Moderate Adjustment Phase

■ In March's US employment statistics, employment rebounded, working hours decreased slightly, and wage growth slowed.  

■ Affected by the sharp rise in energy prices, the balance of risks in the outlook has shifted from a sharp slowdown in the labor market to rising inflation. 
 
The March US employment statistics released on the 3rd showed that non-farm payrolls (an increase of 178,000 month-on-month) rebounded sharply from the decline in February due to the cold wave. Including the three-month average, which reflects the trend (an increase of 68,000 month-on-month), all figures are higher than the break-even employment growth needed to maintain a stable labor supply and demand (the Federal Reserve (FRB) estimate in April 2026: less than 10,000 month-on-month increase). The unemployment rate (4.3%) has also temporarily stopped rising, after peaking at 4.5% in November 2025. Non-farm payroll growth was mainly contributed by the healthcare and welfare sector (an increase of 89,900 month-on-month), which has a relatively low correlation with the economy, with approximately 35,000 of these coming from the return to work following the strike in outpatient medical services. Furthermore, the average weekly working hours (34.2 hours) declined for the first time in three months, and the growth rate of average hourly wages (up 0.2% month-on-month) also slowed. While employment has recovered from the deterioration in mid-February due to temporary factors, adjustments in working hours and wages are already evident, and overall, the labor market remains in a phase of moderate adjustment. 

 
The Job Openings and Labor Mobility Survey (JOLTS) shows that layoffs, which typically increase significantly during recessions (February: 1.721 million), have remained stable, and there are currently no signs of anomalies in the labor market. However, the unemployment rate is higher than the full employment unemployment rate estimated by Michaillat/Saez (FERU, March: 4.15%), and the number of job vacancies per unemployed person (February: 0.91/person) is lower than the 1.00/person reflecting labor supply and demand equilibrium. This indicates that full employment has been disrupted, and the labor supply is beginning to turn into a surplus. 

 
Since the Federal Open Market Committee (FOMC) meeting in January, the FRB has paused its early interest rate cuts in response to the labor market slowdown, stating that it will assess the magnitude and timing of policy adjustments based on future data, changes in the outlook, and the balance of risks. The sharp rise in energy prices since the end of February has shifted the balance of risks in the outlook more towards upward inflation, a point likely to be further confirmed by future data. As long as the labor market adjustment remains within a moderate slowdown range, it is unlikely to provide a basis for resuming interest rate cuts in the short term. On the other hand, price trends do not immediately lead to interest rate hikes; if cost-push inflation is only temporary, there is no need to rush into monetary policy responses. Changes in medium- and long-term inflation expectations and potential inflation will be the focus of attention, and the policy is expected to maintain a wait-and-see stance until their impact becomes clearer.