Trump tariffs still chill markets despite strong jobs report, asset managers say

A better-than-expected March jobs report that is a snapshot of the previous month before the impact of the wide-ranging tariffs enacted by President Trump on April 3 will do little to calm market jitters, asset managers said.

Although the report will help ease fears of an immediate softening in the U.S. labor market, it is a "side dish with the market just focusing on the entrée: tariffs,” said Lindsay Rosner, head of multisector fixed-income investing at Goldman Sachs Asset Management, which has $2.8 trillion in assets under supervision.

Glen Smith, chief investment officer at GDS Wealth Management, with $1.2 billion in AUM, said the latest jobs report showed that the economy is still creating jobs at a robust pace even with the tariff uncertainty and federal job cuts, while noting that job growth is “arguably” the most important economic indicator. However, Smith cautioned the data is “backward looking and doesn't say anything about how employers might fare over the coming months.”

The U.S. economy created 228,000 jobs in March, well above February’s downwardly revised figure of 117,000 and exceeding economists’ expectations, the U.S. Bureau of Labor Statistics reported on April 4. The unemployment rate edged up to 4.2% from 4.1% in the prior month.

Economists had expected an increase of only 130,000 jobs in March and a jobless rate of 4.2%, according to a survey by FactSet Research Systems, a financial data firm.

But Adam Hetts, portfolio manager and global head of multiasset at Janus Henderson Investors, said the strong March jobs data “is hardly a counterpunch to tariff news” and the focus is already shifting to next month's jobs report.

Janus Henderson has $378.7 billion AUM.

The bureau also noted some revisions to payroll figures from the past two months: The January figure was revised downward by 14,000 to 111,000, while the February data was revised downward by 34,000 to 117,000. With these revisions, employment in January and February combined was 48,000 lower than previously reported.

In March, job gains were especially pronounced in the healthcare, social assistance, transportation, warehousing and retail sectors. However, federal government employment declined by 4,000 in March, following a loss of 11,000 such jobs in February. Federal employees on paid leave or receiving ongoing severance pay were counted as “employed” in the survey.

Over the past 12 months, the average monthly job gain was 158,000.

As of the morning of April 4, according to CME Group's FedWatch tool, market participants' pricing of fed fund futures indicated there is a 58% probability that the central bank will keep rates unchanged at the next meeting on May 7 and a 42% probability it will cut rates by 25 basis points.

The Fed’s key short-term interest rate is currently in a range of between 4.25% to 4.5%, after the central bank kept rates unchanged at the March 19 meeting.

Natalia Lojevsky, managing director at CIFC Asset Management, said while the latest jobs data is now “especially stale” in light of this week’s sweeping tariff actions, the strong beat on U.S. jobs should help investor sentiment heading into the weekend.

But she added that this also puts the Federal Reserve in an arguably more difficult position.

“While the market has pushed rate cut expectations up from two to five for this year, the central bank will likely need to see the ‘hard data’ deteriorate much more significantly before taking such aggressive action, given current inflation that is still well above their target range and the still unknown inflationary impacts of the tariffs,” she said.

CIFC Asset has more than $43 billion in assets under management.

Smith of GDS also said that Federal Reserve Chair Jerome Powell has a “key opportunity” to calm the markets in his speech on April 4.

“Assurance from the central bank that they will step in to keep prices stable and employment continuing is something investors are eager to be reminded about,” Smith added.

For now, Smith thinks the Fed will remain on hold when it comes to any interest rate decisions until the second half of the year in order to “allow more time for the dust to settle from the tariff situation.”

Powell is scheduled to deliver a speech at 11:25 p.m. on April 4 before the Society for Advancing Business Editing and Writing Annual Conference, in Arlington, Va.