Strong jobs report creates Fed easing quandary amid tariff distress

(Reuters) - The U.S. economy added far more jobs than expected in March, but President Donald Trump's sweeping import tariffs could test the labor market's resilience in the months ahead amid sagging business confidence and a stock market selloff.

Nonfarm payrolls increased by 228,000 jobs last month after a downwardly revised 117,000 rise in February, the Labor Department said on Friday. Economists polled by Reuters had forecast payrolls advancing by 135,000 jobs after a previously reported 151,000 rise in February. The unemployment rate rose to 4.2% from 4.1% in February.

The report came amid a global stock rout and rally in safe-haven government bonds after U.S. President Donald Trump's sweeping tariff plans sowed fears about a global recession, with the sell-off deepening after China said it would impose additional levies of 34% on American goods.

MARKET REACTION:

STOCKS: S&P 500 E-minis pared a loss to -2.5%, still pointing to another big drop at the open on Wall Street

BONDS: The yield on benchmark U.S. 10-year notesrose to 3.9214%, the two-year note yield rose to 3.545%FOREX: The dollar index turned 0.19% higher and the euro turned 0.26% lower

COMMENTS:

TIM GHRISKEY, SENIOR PORTFOLIO STRATEGIST, INGALLS & SNYDER, NEW YORK CITY

"The market isn't paying a lot of attention to the jobs report. It's in a panic mode, selling at any price."

"There's concern about a recession, very justified, about the tariff issue being escalated and bringing the global economy to a halt."

"But the jobs report was extremely strong for what that's worth. The non-farm private payrolls number was well above expectations. This seemed to make up for the downward revision to the Feb numbers and more."

"It will be pointed out probably by the administration in D.C. that the underlying economic fundamentals remain good but with the rout in the stock market indicating significant concern about the future, historic data carries less weight."

"The White House will point to this as a very positive sign. Futures have pared premarket loss. It's not that its irrelevant but you remain in a market that's more emotional than factual. The prevailing emotion remains to reduce equity exposure."

SEEMA SHAH, CHIEF GLOBAL STRATEGIST, PRINCIPAL ASSET MANAGEMENT, LONDON (emailed comment)

"The market needed today's number. Everyone knows that economic weakness is coming, but at least we can be reassured that the labor market was robust coming into this policy-driven shock and therefore, the slowdown should not be overly steep. Next month is when hard data is likely to start showing signs of what soft data has already been signalling. From the Fed's perspective, today's payrolls number will not prevent them from future policy rate cuts - they know that this is just a moment of calm before the storm hits.

"The Fed will likely provide some stimulus over coming months. But this is a government-driven shock not a central bank-driven shock - the Fed can only sooth the pain around the edges."

BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN

"There's not a lot to dislike about the employment report. Haters will hate, but aggregate hours worked and aggregate weekly earnings both increased. Federal employment cuts are in the data, but not completely as those won't show up for a few more months. The diffusion index for manufacturing is abysmal and the sector as a whole only added 1,000 jobs. This suggests that manufacturing's glimmer of hope has faded for now. The Fed doesn't meet for another month, but when it does it can comfortably cut if tariffs are still in place at that time, but it won't likely feel a sense of urgency to."

LINDSAY ROSNER, HEAD OF MULTI SECTOR FIXED INCOME INVESTING, GOLDMAN SACHS ASSET MANAGEMENT (emailed comments)

"Today's better than expected jobs report will help ease fears of an immediate softening in the US labor market. However, this number has become a side dish with the market just focusing on the entr?e: tariffs."

(Compiled by the Global Finance & Markets Breaking News team)