Synopsis:

Morgan Stanley expects a cooling in U.S. job growth for March, with payroll gains softening and layoffs starting to show in federal employment. While wage growth remains steady, the risks are skewed toward a weaker labor market narrative.

Key Points:

• Payrolls: Forecast at 130k, down from 151k in February and well below the 6-month average of 190k.

• Government jobs: Federal hiring expected to slow, with layoffs beginning to pick up.

• Private sector: Gains likely to be modest, despite a +15k boost from returning strikers.

• Wages: Average hourly earnings expected to rise 0.3% month-on-month.

• Unemployment rate: Seen holding steady at 4.1%.

• Market risk bias: Downside risks dominate; strong job growth would be needed to reverse mounting fears of a sharper economic slowdown.

Conclusion:

Morgan Stanley’s outlook for the March jobs report suggests growing labor market fragility. Even with modest payroll growth and stable wages, the bar is high for data to counter recession concerns. Unless hiring meaningfully surprises to the upside, markets may continue to lean toward a weaker macro outlook