Jobs Report: Unemployment 3.8%, Rate-Sensitive ETFs Mixed

Nonfarm payrolls rose more than expected in March, pushing Treasury yields higher.

Research Lead
Reviewed by: Staff
Edited by: Ron Day

U.S. nonfarm payrolls jumped more than expected in March, cutting the unemployment rate while modest wage growth eased concerns about the Federal Reserve's response to inflation.

Payrolls swelled by 303,000 last month, according to a statement from the U.S. Labor Department. That handily beating the approximately 212,000 economists had expected, according to MarketWatch and was up from more than 270,000 in February. Average hourly earnings rose 0.3%, matching expectations, pushing the 12-month gain to 4.1%.

The unemployment rate ticked down to 3.8% from 3.9% and has remained below 4% for more than two years. Economists had expected the jobless rate to hold at 3.9%. The February jobs total was revised down from the 275,000 initially reported. 

Richmond Federal Reserve Bank President Thomas Barkin on Friday said the jobs report was "quite strong," referring to the unexpected increase in jobs added to the economy. "It's been 26 months in a row with unemployment below 4%. That's the first time that's happened since the late '60s," Barkin said an event in Maryland.

Sticky inflation readings have pushed out investors' hopes for interest rate cuts this year, and today's report adds to the so-called higher-for-longer narrative. On Friday, markets were pricing in a 55% chance the Fed will lower interest rates at its June meeting. 

As of midday trading, stocks were up 1% and the bond prices were down 1%, as measured by the SPDR S&P 500 ETF Trust (SPY) and the iShares 20+ Year Treasury Bond ETF (TLT), respectively.

What Is the Nonfarm Payroll Report? 

The monthly Bureau of Labor Statistics (BLS) nonfarm payroll report primarily focuses on the net number of jobs created in the private sector of the U.S. economy over the previous month. This excludes government employees, farmworkers, and private household workers. Beyond the headline number, the report provides a wealth of other data points like: 

  • Unemployment rate: This indicates the percentage of the labor force that is actively seeking work but unemployed. 
  • Average hourly earnings: This shows how wages are trending, offering insights into inflation and consumer spending power. 
  • Job creation/losses by industry: This details which sectors are adding or losing jobs, valuable for investors in sector-specific ETFs. 

Why Does the Jobs Report Matter to ETF Investors?

The jobs report is a crucial data point for ETF investors for several reasons: 

Impact on Market Sentiment

Investors are watching for data that’s not disruptive of favorable or expected market conditions that could negatively impact their portfolio holdings. They may also be watching for buying opportunities. If there’s a surprise in the data, sentiment can shift and cause movements in ETFs’ and other securities’ prices. 

  • Economic growth: A strong jobs report indicates a healthy economy, which can boost investor confidence and lead to rising stock prices. ETFs that track broad market indexes like the S&P 500, the Nasdaq 100, or the total stock market can benefit from this positive sentiment. But if the data is too strong, it may indicate an overheated economy. 
  • Interest rates: The Federal Reserve closely monitors the jobs report to gauge inflation and economic health. A strong report might signal the need for the Fed to raise interest rates to curb inflation. Rising interest rates can lead to a pullback in prices for rate-sensitive funds, such as growth-oriented ETFs like the Invesco QQQ Trust (QQQ) and long-term bond ETFs like TLT, respectively.  

Industry-Specific Effects

  • Sector performance: The jobs report provides a breakdown of job gains and losses across different sectors. This information can be valuable for investors holding sector-specific ETFs. For example, a strong jobs report in the construction sector might benefit infrastructure ETFs or construction and engineering ETFs
  • Company performance: Ultimately, a strong job market can lead to increased consumer spending, which benefits companies that sell directly to consumers. Funds like the Consumer Discretionary Select Sector SPDR Fund (XLY), which holds companies like these, might see a rise in price. 

Bottom Line on the Jobs Report and ETFs

ETF investors can use the jobs report alongside other economic data to make informed investment decisions, but each report can have various interpretations. For example, a strong jobs report might favor broad market ETFs or sector-specific options tied to industries benefiting from a growing economy, but it may also indicate higher inflation, which can push down rate-sensitive funds. 

In contrast, a weak report might suggest considering defensive ETFs or those less sensitive to economic fluctuations, yet it may also signal lower inflation ahead, helping to push prices for rate-sensitive funds higher. 

Most importantly, investors should keep in mind that economic and market conditions are difficult to predict as these conditions can change directions in the short term, meaning that short-term swings in ETF prices should be expected and investors should invest in a way that is suitable for their risk tolerance and time horizon. 

Kent Thune is Research Lead for, focusing on educational content, thought leadership, content management and search engine optimization. Before joining, he wrote for numerous investment websites, including Seeking Alpha and Kiplinger. 


Kent holds a Master of Business Administration (MBA) degree and is a practicing Certified Financial Planner (CFP®) with 25 years of experience managing investments, guiding clients through some of the worst economic and market environments in U.S. history. He has also served as an adjunct professor, teaching classes for The College of Charleston and Trident Technical College on the topics of retirement planning, business finance, and entrepreneurship. 


Kent founded a registered investment advisory firm in 2006 and is based in Hilton Head Island, SC, where he lives with his wife and two sons. Outside of work, Kent enjoys spending time with his family, playing guitar, and working on his philosophy book, which he plans to publish in the coming year.