Economists are looking at tomorrow’s job report to see whether the robust gains the employment market has made so far this year continued in March, demonstrating the job market’s surprising resilience in the face of high interest rates. 

Most predict that it has, albeit at a less aggressive clip than the first two months of the year. They expect that the economy will have added an average of 208,000 jobs in March, down slightly from a revised 229,000 in January and 275,000 in February. They also expect the unemployment rate to drop slightly, from 3.9 percent in February to 3.8 percent in March. If they’re correct, this would extend the two-year streak of unemployment rates below 4 percent – the longest streak since 1953, when the economy boomed in the years following World War II. 

The unemployment rate is of particular significance because of its bearing on another closely-watched question: whether and when the Federal Reserve plans to lower interest rates from a 20-year high. Beginning in 2022, the Fed raised rates to combat inflation – which has stubbornly remained above its 2 percent target – and has been closely watching the unemployment figure to ensure that high rates don’t trigger a broader economic downturn. If unemployment ticks up above 4 percent in March, the Fed may be more likely to drop interest rates to help stimulate growth. 

“Everyone’s going to be watching to see whether the unemployment rate remains super low,” said Dana Petersen, the chief economist at the Conference Board. “If it rises quickly and materially, then that’s a reason for the Fed to start cutting interest rates sooner rather than later.”

Another key metric from tomorrow’s report: hourly wage growth. Employers tend to pass off higher wages to consumers in the form of higher prices, which drives inflation. Wage growth rose significantly during the pandemic, as employers competed for workers, but has since cooled. If hourly wage growth continues to slow in tomorrow’s report, it may be a positive indicator that the Fed chooses to reduce rates.

“I think wage growth is a little high, still, but not in a real bad way,” said Michael Pugliese, a senior economist at Wells Fargo. “We’re looking for a very gradual continued deceleration as the year progresses.” 

In recent months, the sectors that have added the most jobs are the “triple power house” of healthcare, leisure and hospitality, and government, according to Guy Berger, director of economic research at the Burning Glass Institute. Many of these sectors struggled to find workers during the pandemic. A key question for economists is whether this recent growth is a sign of broader economic strength, or whether they’re simply filling roles they were unable to during the pandemic.

However, if other sectors grow and add to the jobs report, “it means labor market gains are more broadly based and that signals strength in the economy,” said Peterson, the economist the Conference Board.

“But if it continues to be just that subset, then it suggests that labor market activity isn’t necessarily becoming more broadly based or strengthening,” she added. “Those sectors are just known for having severe labor shortages.”

Other economists are optimistic about the outlook for other sectors. 

“I think it’s interesting that we haven’t seen more losers from the Fed’s high interest rates. Construction is one field where many people expected to see a bloodbath,” said Julia Pollak, the chief economist at ZipRecruiter. “Instead, employment’s been flat. Manufacturing also.”

According to Pugliese, the job report gives a useful picture of the health of the economy, though it can be difficult to distill that into one metric.

“It’s telling you about the health of the labor market, and the labor market is how most people derive their income,” he said. “It’s how you pay for shelter and groceries and all your other bills.”