The number of jobs added by US firms in March was 236,000, which was lower than expected and suggests that the labor market is beginning to cool off in the midst of the Federal Reserve’s yearlong drive to increase interest rates in order to calm inflation.
According to the jobs report for the month of March that was released on Friday by the Bureau of Labor Statistics, the unemployment rate fell to 3.5%.
According to Refinitiv, economists were anticipating a net gain of 239,000 jobs for the month and a jobless rate of 3.6%. This is the first jobs report in the last year that has resulted in a disappointment relative to expectations.
Despite the fact that other sections of the economy have slowed down due to the weight of interest rate hikes, the labor market in the United States has been chugging along. However, it is exhibiting some symptoms of cooling.
The number of jobs gained in March was significantly lower than the upwardly revised 326,000 jobs acquired in February and the massive number of jobs gained in January, which was initially 517,000 but was subsequently reduced down to 472,000.
The 236,000 jobs that were added during the month of March represents the lowest monthly growth in employment since a fall in December 2020. If the job losses that occurred during the first year of the epidemic are taken into account, this is the lowest monthly rise in employment witnessed since December of 2019.
The leisure and hospitality sector, together with health care and government, remained at the forefront of the labor market’s expansion in recent years. Retail trade, temporary help services, manufacturing, building construction, and information services were among the industries that reported monthly losses.
The number of people actively looking for work increases, while income growth slows. The Federal Reserve would like to see a greater degree of slack in the labor market: As a result of the economy’s gradual recovery from the pandemic, the demand for workers has significantly outpaced the supply, which has led to pay growth that is significantly higher than average and contributed to rising inflationary pressures.
A labor force that was lower than predicted and participation rates that were delayed to match estimates or meet levels seen before the epidemic have both contributed to the tightness in the labor market.
During the previous two and a half years, a great deal of ink has been used to discuss the subject of why workers were “missing,” with current studies focusing in on the fact that Covid-19 mortality, limited immigration, an aging population, and a long Covid are the key perpetrators in this matter.
A steady stream of workers is currently entering the labor market.
The labor force participation rate for workers between the ages of 25 and 54 reached 83.2% in February, surpassing the levels seen before the pandemic began. And during the most recent month, the overall labor force participation rate continued its ascent, reaching a pandemic-era high of 62.6% after reaching a new high for the month. However, this is still lower than the rate of 63.3% that was recorded in February of 2020.
The increase of 0.3% over the previous month’s average hourly earnings is a little improvement from the increase of 0.2% witnessed in February. The monthly increase in wages was 4.6%, but the yearly gain was just 4.2%, down from 4.6% the previous month.
The typical workweek went from 34.5 hours to 34.4 hours, a little decrease.
The following are four important takeaways from today’s report:
- The rate of wage growth is slowing.
- There is a chance that the labor force will expand once more.
- Employment opportunities are multiplying rapidly in high-demand sectors such as the leisure and hospitality industries.
- The Fed is on track to continue increasing interest rates.
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