The economy added 303,000 jobs in March, the Bureau of Labor Statistics reported Friday, a number that exceeds expectations and comes as good news for President Joe Biden as the general election draws nearer.

Economists had forecast about 212,000 new payroll jobs, adjusted for seasonal variation.

The unemployment rate fell to 3.8%, a low level by historical standards. The February jobs data adds to other evidence that the labor market is retaining strength.

The better-than-expected jobs report is a boost for the White House, which has been working to credit Biden for the strong job creation during his time in office, characterizing the underlying strength of the labor market and broader economic growth as “Bidenomics” in action.

Overall, the labor market has held up despite the Federal Reserve’s interest rate target being at 5.25% to 5.50%, the highest level since the start of the 21st Century. There were expectations that unemployment would be much higher than it is now, and many economists anticipated the U.S. would have entered a recession by now – predictions that proved incorrect.

Dan North, a senior economist with Allianz Trade Americas, said the latest report will lead the Fed to hold interest rates higher for longer. He noted recent reports have shown inflation above the Fed’s 2% target.

“If you’re the Fed, you’re saying, ‘Hey, you know, we’re not at 2%, progress to 2% seems to be pretty slow now, so there’s no need for me to cut from that aspect. And, wow, look at what the economy just did on the growth side,'” North told the Washington Examiner.

“So the economy doesn’t need stimulus, I’m in no hurry to cut – so we’re thinking it’s going to be more like July before the Fed starts to cut,” he added.

Notably, the unemployment rate has been in a narrow range of 3.7% to 3.9% since August 2023. Last month’s job gains occurred in health care, government, and construction. The leisure and hospitality industry also added more jobs in March and is now back to its pre-pandemic level.

The labor force participation rate (62.7%) and the employment-population ratio (60.3%), were little changed in March.

Still, while the labor market on balance has proved resilient, public sentiment by the economy has been soured by high inflation.

The Fed hopes to drive inflation down to 2% through its tighter monetary policy, but inflation has proved stickier in the past few months than anticipated. Annual inflation as gauged by the closely watched consumer price index is at 3.2% and in the Fed’s preferred gauge, the personal consumption expenditures price index, inflation ticked up slightly to 2.5% in February.

Consumers are laser-focused on inflation and the prices of various goods – something that Republicans have been keen to emphasize and use as a cudgel against Biden and Democrats.

In the past month, the prices of commodities like cocoa, olive oil, and coffee have broken all-time records or have hovered near all-time highs. For instance, prices on cocoa futures topped $10,000 per pound for the first time – staggering 128% growth since the start of the year. While it hasn’t yet, eventually that will translate to higher chocolate prices in the U.S.

The global price of olive oil peaked in January but has remained near record highs while the global benchmark for coffee hit an all-time record this week.

Perhaps most notably, the price of oil – which soared in 2022 when Russia invaded Ukraine – is once again on the rise. Crude oil futures are up more than 20% since the start of the year. Eventually, higher crude prices will translate to more pain at the pump for consumers during a major election year. Gas prices are up 6% over the past month, according to AAA.

Taken together, it is an unusual economic landscape for the U.S. Inflation is sticky, interest rates are soaring, yet gross domestic product is expanding and unemployment is low. The questions now are how long the labor market can remain above water and when will the Fed lower interest rates.

“Last year’s combination of resilient growth and moderating inflation is unusual historically and should be celebrated,” said Simona Mocuta, committee chair and chief economist at State Street Global Advisors. “The elements appear in place to extend a milder version of this in 2024, although we should not take this for granted.”

The central bank itself projects that the unemployment rate will rise to 4% by the end of the year, still a relatively low level given the higher interest rates. Fed officials have also indicated that they think there will be three downward revisions to the federal funds rate, although only two is also likely.

The question of when the Fed will start cutting rates is also open to much speculation.

Just four months ago in December, most investors expected that the central bank would have already cut interest rates by now. But given the stickier inflation, the first rate cut is expected to come in June or July.

Investors, as of Friday morning after the jobs report was released, were pricing in a probability of just over 58% that the Fed will end up cutting interest rates by the time its June meeting has concluded, according to the CME Group’s FedWatch tool, which calculates the probability using futures contract prices for rates in the short-term market targeted by the Fed.

But predictions on rates cuts are shaded by much disagreement. There is about a 1 in 4 chance that the Fed doesn’t cut during its next three meetings and finally pivots in September, according to investors.

The Fed is threading the needle by holding rates at their current level. On one hand, the central bank wants to be certain that inflation is falling to 2%, and if it cuts too soon, too-high inflation could rear its ugly head once again. On the other hand, if the Fed keeps rates too high for too long, the labor market could take a whack and GDP growth could fall, possibly resulting in a recession.