Weekly Update 4/10/2026: US March Employment Report Comes In Better Than Expected as Ceasefire Takes Hold in the Middle East
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Domestic Economic News
The US employment report released last Friday showed a surprisingly strong rebound in job growth for March, significantly exceeding economist expectations. US employers added 178,000 jobs in March, far surpassing the 59,000-60,000 jobs economists had forecast. This marked the highest monthly job gain in 15 months and represented the best month for job growth in more than a year. The unemployment rate dipped to 4.3% from 4.4% in February. The report included a significant downward revision to February's figures. What was initially reported as a loss of 92,000 jobs was revised to show a loss of 133,000 jobs. The March gains represented a sharp turnaround from this revised February decline. Hiring was broader-based than in recent months. Healthcare and social assistance sectors led the way, adding 89,900 jobs. Construction also saw gains. The return to work by 35,000 striking healthcare workers and a seasonal 44,000 increase in leisure and hospitality jobs accounted for much of the March gains. Wage growth came in softer, rising 0.2% month-over-month.
The US service economy expanded in March at a slower pace as employment shrank by the most since 2023 and input prices accelerated sharply. The ISM services index fell 2.1 points to 54, dragged down by weaker employment and less growth in business activity. Readings above 50 indicate expansion. The Institute for Supply Management’s gauge of prices paid for services and materials jumped to 70.7, the highest since October 2022, according to data released Monday. The 7.7-point increase from a month earlier was the largest in nearly 14 years, comparable to the change seen in the group’s manufacturing survey. Businesses are experiencing a sharp run-up in cost pressures for energy and other inputs due to the Iran war. The conflict has essentially closed the Strait of Hormuz, a key passage for oil and other critical products. “The predominant commentary this month was about impacts and adjustments due to the conflict with Iran and the expected flow through of higher oil prices at some point,” Steve Miller, chair of the ISM Services Business Survey Committee, said in a statement. “Companies across many industries reported seeing higher gas and diesel pricing, and inventories of multiple goods increased to withstand supply chain disruptions or short-term oil price impacts,” he said. The war is also fueling uncertainty about the economic outlook, which may be prompting more caution among companies. The ISM gauge of employment at service providers slumped 6.6 points, one of the biggest monthly declines since the pandemic, to 45.2. Still, official jobs data from the government released last Friday when markets were closed showed overall payrolls rose a larger-than-forecast 178,000 in March. The rebound in employment was helped by the return of more than 30,000 health care workers, who had been on strike. Business activity, which parallels the group’s factory output index, slid 6 points — the most since mid-2024 — to 53.9. Thirteen services industries reported overall growth in March, including wholesale trade, management of companies, finance and insurance as well as accommodation and food services. Retail trade was among the three sectors that shrank. The supplier deliveries gauge climbed to the highest level since October 2024.
US orders for business equipment rebounded in February, suggesting companies were moving forward on investment plans before the Iran war. Bookings for non-defense capital goods excluding aircraft, a proxy for investment in equipment, increased 0.6% after a downwardly revised 0.4% decline a month earlier, Commerce Department figures showed Tuesday. The median forecast in a Bloomberg survey of economists called for a 0.5% advance in February. Bookings for all durable goods — items meant to last at least three years — fell 1.4%, largely reflecting a decline in orders for aircraft. Boeing Co. said it received fewer orders for its planes in February than a month earlier. The durables report showed orders increased for computers, motor vehicles, metals and machinery. Economists expect business investment will remain solid again this year as companies keep spending on artificial intelligence and take advantage of more favorable tax provisions. At the same time, it’s unclear how guarded firms will become because of the Iran war. The conflict has sharply driven up prices of oil and some other commodities. Meanwhile, non-defense capital goods shipments excluding aircraft, which feed into the equipment investment portion of the gross domestic product report, increased 0.9%. Rather than orders that can be canceled, the government uses data on shipments as an input to GDP. Economists prefer the core equipment shipments and orders figures because they offer a clearer picture of the trend in underlying business investment and the impact on the economy.
The pickup in February supports the expectation that businesses outside of AI would increase capital spending after a cautious 2025, though the data predate the conflict in the Middle East, Stephen Stanley, chief US economist at Santander US Capital Markets LLC, said in a note. “I suspect that firms turned cautious again in March (and likely April), waiting to see how high energy prices would move and for how long,” he said. Before the durables report, the Federal Reserve Bank of Atlanta Fed’s GDPNow forecast anticipated a nearly 0.75 percentage point contribution to first-quarter growth from business spending on equipment. Those outlays contributed 0.21 point in the fourth quarter. The Commerce Department’s report showed bookings for commercial aircraft, which are volatile from month to month, fell nearly 29% from a month earlier. Boeing said it received 21 orders in February, down from 107 the prior month. Boeing also reported it delivered 51 aircraft in February, up from 46 shipments a month earlier.
US consumer spending barely rose in February against a backdrop of persistent inflation that’s set to accelerate due to the Iran war. Inflation-adjusted consumer spending increased 0.1% after stagnating in January, continuing an extended period of lackluster demand, a report from the Bureau of Economic Analysis showed Thursday. The so-called core personal consumption expenditures price index, which excludes food and energy items, increased 0.4% from January. From the prior year, the Federal Reserve’s preferred gauge of underlying inflation advanced 3%. Spending on goods rose for the first time in three months, driven by a rebound in motor vehicle purchases. Services outlays edged up, fueled by transportation services. The latest spending figures are consistent with a consumer who has grown more cautious over the last six months amid cost-of-living concerns and a sluggish job market. Real disposable income declined 0.5%, the most in nearly a year, according to the BEA. Inflationary pressures have mounted more recently as the war drives up the cost of fuels and materials. Some companies have already started to pass along those costs or announced plans to do so. Higher tax refunds helped support spending in February, but the rise in energy prices risks blunting that tailwind in the months ahead. Delta Air Lines Inc. said it’s “looking to do more” fare increases beyond what has already been levied. And the US Postal Service plans to raise prices by 8% on some packages until mid-January of next year. While oil prices tumbled on Wednesday after the US and Iran agreed to a two-week ceasefire in exchange for Tehran allowing safe passage through the Strait of Hormuz, Brent crude futures are still about $25 a barrel more expensive than before the war.
Separate BEA figures showed the economy expanded at a slower pace than previously estimated in the final months of 2025. Inflation-adjusted gross domestic product, which measures the value of goods and services produced in the US, increased at a 0.5% annualized rate in the fourth quarter. The BEA data also showed a closely watched metric of services inflation that excludes energy and housing climbed 0.2%, the smallest advance since September. Personal income, a metric not adjusted for inflation, decreased, primarily reflecting declines in dividend income and personal transfer receipts. Wages and salaries rose 0.2%, while income on assets — a key support for wealthier households — declined. The saving rate dropped to 4%.
On the employment front, recurring applications for US jobless benefits fell to the lowest level in almost two years, adding to evidence of stabilization in the labor market. Continuing claims, a proxy for the number of people receiving benefits, fell to 1.79 million in the week ended March 28, the least since May 2024 and below all estimates in a Bloomberg survey. Initial claims rose to 219,000 in the week ended April 4. Thursday’s figures point to a labor market still in a “low- hire, low-fire” environment, with claims near historically low levels. The government’s monthly report on employment showed hiring rebounded in March across a broad range of industries, while the unemployment rate edged lower. Here is what Bloomberg Economics had to say: “The larger-than-expected rise in initial jobless claims in late-March and early-April comes in a period that typically sees greater volatility, due to holidays such as Passover and Good Friday. Looking at smoothed data for all of March, average claims were lower in 37 states — including California, despite tech-sector layoffs — showing that layoffs remain limited geographically.”
US inflation surged in March by the most in nearly four years as the war with Iran sent gasoline prices skyrocketing. The consumer price index rose 0.9% from February, according to data out Friday. From a year ago, it picked up to 3.3%, the strongest pace since 2024. A record increase in gas prices was responsible for nearly three-quarters of the monthly advance, the Bureau of Labor Statistics said. Another measure that excludes food and energy costs increased at a slower 0.2% pace. The data underscore how the war in the Middle East is beginning to ripple through the US economy, worsening the affordability woes many households have faced in recent years. Americans are already experiencing higher prices at the pump, and service providers including Delta Air Lines Inc. and the US Postal Service have warned of price hikes ahead. Even if the US-Iran truce holds and there’s a rapid resolution to the conflict, economists anticipate higher costs are likely to persist in the near term as oil output normalizes. Beyond the energy shock, a disruption in the supply of fertilizer is expected to eventually lead to higher grocery bills, while rising transportation costs could impact all kinds of consumer goods. Despite the 21% rise in gas prices, increases in other categories were relatively tame in March. The prices of goods excluding food and energy, a category economists and policymakers have been watching closely to gauge the impact of President Donald Trump’s tariffs, rose a modest 0.1% for a second month. Used-car prices fell for a fourth straight month, though prices for new cars and apparel rose. Grocery costs fell 0.2% on a decline in meat, dairy and egg prices. Bloomberg Economics estimates it could take as long as a year for higher fertilizer costs to impact the CPI. Services costs excluding energy rose 0.2% in March. Airfares rose 2.7% from February as some customers rushed to lock in prices before they jump further as the war pushes the cost of jet fuel higher. United Airlines Holdings Inc. recently warned it may have to hike prices by 20% because of the oil shock. Another services gauge Federal Reserve officials watch closely, which strips out housing and energy costs, also rose 0.2%, the slowest pace this year. Shelter prices — which comprise the largest portion of the index — rose 0.3%. Medical care services costs were little changed, while a category called other personal care services — which includes haircuts — fell by the most on record. Admissions to sporting events fell more than 10%. Fed officials are closely tracking the impact the oil shock and the war more broadly will have on prices. Investors see little chance of another interest-rate cut in 2026 amid renewed inflation risks, according to futures, though many economists are maintaining forecasts for one or more reductions later in the year. Central bankers also pay attention to wage growth because it can help inform expectations for consumer spending, the main engine of the economy. A separate report Friday that combines the inflation figures with recent wage data showed that real average hourly earnings rose just 0.3% from a year ago, the least since 2023. Economists have lowered their growth estimates for this year on expectations that higher prices and a weaker labor market will take a toll on consumer spending. Government data out this week showed inflation-adjusted spending barely rose in February, adding to a streak of sluggish demand.
Interest Rate Insight and the Fed
Bond traders boosted wagers that the Federal Reserve will lower interest rates this year as a US-Iran ceasefire sent oil tumbling. Treasuries rallied along with other government debt markets, paring losses since the war began Feb. 28. The energy price surge it caused threatened to stoke inflation and cause central banks either to delay interest-rate cuts or to raise rates. In the case of the Fed, the oil shock evaporated expectations for two-quarter point cuts this year, and briefly stoked wagers on a hike. Wednesday’s rally saw swap contracts price in a roughly one-in-three chance of a cut, up from near zero at the start of the week. “Treasuries have taken the ceasefire announcement in stride, with investors restoring rate cuts for 2026 and rates moving lower amid expectations that inflationary pressures could ease,” said Gennadiy Goldberg, head of US interest rates strategy at TD Securities. US yields declined by less than three basis points, trailing steeper yield declines in most European bond markets, reflecting the region’s greater exposure to soaring energy prices. The US 10-year yield was lower by about two basis points near 4.27% in Wednesday afternoon trading after the announcement, the lowest since mid-March, versus declines of at least 10 basis points for most European counterparts. Short-maturity euro-zone and UK yields plunged as traders slashed wagers on interest-rate hikes by the European Central Bank and Bank of England. As part of the two-week truce, Tehran agreed to reopen the Strait of Hormuz, a crucial transit route for oil and gas shipments. Crude prices plunged. “You can take out more hikes from the European central banks,” Myles Bradshaw, head of global aggregate strategies at JPMorgan Asset Management, said on Bloomberg TV. “The inflation shock is relatively small and what’s uncertain is the growth shock,” he added, saying the economy was in a more vulnerable position than when Russia invaded Ukraine in 2022. “I think in that world, central banks will err on the side of caution.” Markets had been pricing stable or falling rates in Europe before the war stoked concerns that inflation would accelerate globally. Since the US launched strikes against Iran on Feb. 28, yields in Europe soared to multi-year highs and gauges of market volatility posted a record surge. US Treasuries also sold off sharply, leading Treasuries to post their biggest monthly loss since October 2024 in March. Inflation expectations fell sharply Wednesday, spurring the bid in bonds. A proxy for euro area price growth over the next 10 years dropped to 2.1%, almost fully erasing the sharp jump since the start of the war. Swaps now imply around a 30% chance that the ECB will hike rates by a quarter-point later this month, down from 70% on Tuesday. “If the ceasefire gets extended, an ECB rate hike in April, and beyond, becomes unlikely,” said Christoph Rieger, head of fixed income and credit research at Commerzbank AG.
Bond traders held wagers steady in terms of the Federal Reserve lowering interest rates just once this year after data confirmed that US inflation quickened in March as the Iran war led to higher gasoline prices. Interest-rate swaps on Friday showed traders pricing in a roughly one-in-three chance of a quarter-point rate cut this year, little changed from before the data. Treasuries edged lower after the report, with yields up two to three basis points across maturities. “The CPI data today will not support bond prices as next month’s inflation report will reveal more headaches for investors and the Fed,” Tom di Galoma, managing director at Mischler Financial Group, said. The March consumer price report provides the first tangible glimpse of inflation dynamics since the US attacked Iran at the end of February. Last month’s surge in oil prices propelled Treasury yields sharply higher, before the prospect of a ceasefire — agreed to this week — sparked a reversal in crude and bonds. The moves come after last week’s stronger-than-expected employment report partially soothed growth worries, renewing investors focus on the potential fallout from elevated energy costs. Fed officials have flagged the prospect of higher inflation keeping policy on hold for some time, as their preferred gauge of consumer prices is rising faster than their 2% long-run target. Minutes of the Federal Open Market Committee’s March meeting, released Wednesday, revealed that a growing contingent of Fed officials was concerned that the war in Iran would contribute to rising inflation.
Impactful International News
A wave of optimism swept through global markets in Wednesday trading, lifting stocks and bonds while driving oil toward its biggest plunge in six years after the US and Iran reached a ceasefire deal. The sharp rebound in risk appetite drove the S&P 500 up about 2.5%. A tumble in oil to $95 eased concern about an energy crisis that could fuel inflation, reviving bets the Federal Reserve will cut interest rates in 2026. As the haven bid waned, the dollar erased its advance for the year. Wall Street’s so-called fear gauge - the VIX - hit pre-war levels. Airlines, which had been pummeled by worries about skyrocketing fuel prices, soared. Emerging-market shares were on track for their biggest advance since the onset of the pandemic. Bitcoin topped $71,000. Just about 90 minutes before President Donald Trump’s deadline for Iran to agree to a ceasefire and reopen the Strait of Hormuz, a two-week truce was announced. While there have been reports of ongoing regional hostilities, the accord helped ease worries about a global economic crisis. “The reaction was classic macro playbook,” said Fawad Razaqzada at Forex.com. “Risk assets caught a bid, crude tumbled, and the dollar gave back a chunk of its safe-haven premium.” While the passage of oil tankers through the Strait of Hormuz was reportedly halted amid Israeli attacks on Lebanon, that wasn’t enough to jolt markets. “Investors are confident that oil prices could ease further and the Strait of Hormuz will re-open again and hopefully stay open beyond the two-week ceasefire period,” Razaqzada said. “At Barclays Plc, strategists led by Emmanuel Cau said stocks were likely to experience a “powerful short squeeze,” as hedge funds remove protections that were put in place to hedge the risk of further escalation in the war.
Investor confidence in the euro-area economy dropped to the lowest in a year due to the Iran war, casting doubt on the region’s nascent recovery. The Sentix index sank 16.1. points to -19.2 in April as expectations and a measure of current conditions suffered, a release Tuesday showed. The gauge is based on an April 2-4 poll among 1,047 investors. After “an initial shock reaction” in March, “the crash follows,” Sentix Managing Director Patrick Hussy said in a statement. “Investors realize: the issue of ‘recession’ is back on the agenda.” Such developments put European Central Bank officials in a tricky spot: They say they won’t allow the accompanying surge in oil and gas prices trigger a broader bout of inflation similar to 2022, raising the prospect of interest-rate hikes. At the same time, they are worried about the impact of the conflict on economic activity. The German economy also took a severe hit, Sentix said Tuesday. The overall index for Europe’s largest economy fell 15.6 points to -27.7 points, with expectations dropping to -16.8 points, their lowest level since September 2024.
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