Good morning, investors. We learned Friday that the US added more jobs than expected in March but the stock market wasn’t even open to react to the news.

That makes today the first session that investors will work through the payrolls data on top of start-and-stop updates on the Iran conflict.

The March jobs report just gave the Fed permission to do nothing while oil prices continue to fuel recession fears. 

The US economy added 178,000 jobs in March — the strongest since December 2024 — but nearly half the gain came from healthcare workers returning from the Kaiser Permanente strike that had cratered the February numbers.

Strip that away and the data doesn’t exactly qualify as a blow out, but that nuance likely won’t matter to the Federal Reserve. 

Markets still see virtually no chance of a rate cut in the months ahead. 

Before Friday, a trend of weak hiring had kept the door open to easing.

The revision to February’s jobs report from a loss of 92,000 to a loss of 133,000 confirmed the trend. 

Yet one strong headline has shifted the narrative. 

Meanwhile, oil prices have surged 66% since the Iran conflict began at the end of February, US national gas prices have topped $4 a gallon, and the Strait of Hormuz remains effectively closed. 

As a result, on Sunday President Trump threatened to escalate military strikes on Iranian infrastructure.

The Fed, then, must figure out what to do with a labor market that suddenly appears to be stabilizing right as oil markets begin to price in an economy that will need support. 

One number in Friday's report got buried beneath the headline. Average hourly earnings grew just 3.5% year-over-year, the slowest pace since May 2021.

That suggests inflation pressure from the labor side is cooling. But no FOMC member will cite cooling wages as a reason to cut — not with 178,000 new jobs and crude above $110.

In other words, if the Strait of Hormuz stays closed through Tuesday, new geopolitical and energy shocks could hit the economy just as central bankers become more convinced of staying put. 

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🛢️ Iranian drones struck Kuwait Petroleum's headquarters and power plants. The attacks expanded Tehran's target list beyond coastal refineries to the administrative heart of Gulf energy infrastructure, knocking a water desalination plant offline. (Reuters)

🏦 Kevin Warsh is one step closer to the Fed. The Senate Banking Committee will hold a hearing on April 16 to consider him for the top job, even as a key Senator said he won’t vote for Warsh out of concerns over a separate investigation into the Fed. (CNBC)

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