Fed's Daly Flags Labor Market Fragility as Geopolitical Risks Rise

March payrolls rose by 178,000, a rebound from February's sharp slowdown, while the unemployment rate eased to 4.3%, according to CNBC's "Fed Whisperer" Nick Timiraos. Beneath the headline gain, the picture looks softer: year-over-year wage growth for typical workers cooled to its weakest pace since the post-pandemic recovery began five years ago. Smoothing the volatile February and March readings points to a much slower underlying trend, with average monthly job growth of just 22,500. That pace would have been a clear warning sign two years ago; now, it may still be viewed as tolerable—a shift Fed officials have struggled to explain. San Francisco Fed President Mary Daly wrote Friday that "it is not easy to convince the public that an economy with zero job growth can still be consistent with full employment." She warned the setup is especially vulnerable to fresh supply shocks. If the Iran conflict drags on and higher fuel costs or commodity shortages squeeze businesses and households, the labor market may have little cushion to absorb the hit. Inflation worries could also erode confidence in rate cuts, further narrowing the Fed's room to maneuver.