US employers added just 236,000 jobs in March, coming in below expectations and indicating that the labor market is cooling off amid the Federal Reserve’s yearlong rate-hiking campaign to chill inflation.
The unemployment rate dropped to 3.5%, according to the March jobs report released Friday by the Bureau of Labor Statistics.
Economists were expecting a net gain of 239,000 jobs for the month and a jobless rate of 3.6%, according to Refinitiv. This is the first jobs report in 12 months that came in below expectations.
While the US labor market has kept trucking along despite other areas of the economy slowing under the weight of interest rate hikes, it is showing some signs of cooling.
“The labor market in March came in like a lion with a banking crisis and more layoffs, and is going out like a lamb with a solid jobs report,” said Daniel Zhao, Glassdoor’s lead economist, in a statement. “The labor market is still strong, but it’s gliding slowly back down to Earth.”
Over the past 12 months, the labor market has seen a net gain of more than 4.1 million jobs, averaging 345,417 jobs gained, per month, helping drop the unemployment rate to decades-low levels.
March’s total is a notable reduction from February’s upwardly revised 326,000 jobs gained and January’s monster jobs number — originally 517,000 but subsequently revised down to 472,000.
The 236,000 jobs added during March is the smallest monthly gain since a decline in December 2020. Excluding the losses seen during the first year of the pandemic, it’s the smallest monthly jobs gain since December 2019.
However, the job market remains above pre-pandemic norms: Between 2010 and 2019, the economy added an average of 183,000 jobs a month.
President Joe Biden called the March employment report a “a good jobs report for hard-working Americans,” in a statement released Friday morning.
Industries such as leisure and hospitality, health care and government continued to lead the way in job gains. Industries reporting monthly losses included retail trade, temporary help, manufacturing, construction and information services.
“Industries that were facing acute labor shortages, particularly hospitality, are really making gains in getting the workforces back that they needed to,” Jim McCoy, senior vice president at ManpowerGroup, told CNN. “We saw some moderation in a few other sectors like government, like health care and then pretty much stability across most of the rest of the sectors. You have a few drops — retail dropped 15,000 — but in the grand scheme of things, I wouldn’t consider that an alarming drop at all; that’s just a normal wobble within a course of a month.”
Employment in leisure and hospitality still has yet to recover to pre-pandemic levels. Through March, the industry was about 368,000 jobs, or nearly 2.2%, shy of February 2020 employment levels, an analysis of BLS data shows.
More cooling ahead
Labor market data released earlier in the week teed up a more moderate jobs report.
Job openings fell to 9.93 million (the first sub-10 million total in nearly 10 years); ADP’s private-sector job gains came in at 145,000 for March, landing below expectations of 200,000; the Challenger Report showed job cuts on the rise with 89,703 layoffs announced in March, a 15% gain from February; and continuing jobless claims hit 1.823 million, a level not seen since December 2021.
For many months, weekly jobless claims data continued to paint a picture of an incredibly tight labor market that showed little impact from the building waves of mass layoff announcements from firms in technology and beyond.
However, Thursday’s release from the Department of Labor included a series of significant revisions and seasonal adjustments to better reflect the labor market dynamics since the pandemic.
The newly revised data shows a “clear upward trajectory” in initial claims since the beginning of February, with the four-week moving average rising to 240,000 claims from 200,000, noted Dante DeAntonio, director of Moody’s Analytics.
“The new revised path of [jobless] claims more closely aligns with an increase of job cut announcements in recent months and also with the slowdown in payroll growth,” he said in a note. “[Unemployment insurance] claims data will continue to provide an early signal into whether the labor market is likely to cool further in the coming months.”
Some leading indicators in the March jobs report moved in a direction that would show a further cooling coming: The average workweek inched down to 34.4 from 34.5 hours, indicating employers could be starting to cut hours; temporary employment fell; and construction lost jobs for the first time since January 2022.
“I wouldn’t necessarily call it an alarm bell at the moment, but those are the sectors [and indicators] you’re going to want to continue to watch very closely,” ManpowerGroup’s McCoy said, noting that one month does not make a trend and that there remains strength in household finances.
Still, the labor market continues to show resilience, said Amy Glaser, senior vice president at Adecco, a human resources and staffing firm.
“In reality, it’s more of a rebalancing from the white-hot market post-pandemic,” she said. “We’ve heard a lot about layoffs, but there were still so many unfilled jobs in the tech sector that what we’re seeing is a lot of folks who have been displaced or lost their jobs in the last few months, are very quickly finding new opportunities.”
As of March, the median duration of unemployment was 8.1 weeks, down from 8.3 weeks in February, BLS data shows.
Labor force participation climbs and wages ease
The Fed wants to see more slack in the labor market: As the economy recovers from the pandemic, the demand for workers has far exceeded the supply, contributing to higher wages and inflationary pressures.
Contributing to the tightness has been a smaller-than-expected labor force and participation rates that were slow to match projections or meet pre-pandemic levels.
During the past two and half years, a lot of ink has been spilled on the question of why workers were “missing,” with recent research zeroing in on Covid-19 deaths, reduced immigration, aging population and long Covid as the primary culprits.
Workers are now filing back into the labor market.
In February, the labor force participation rate for workers between the ages of 25 and 54 hit 83.2%, surpassing pre-pandemic levels. And last month, the overall labor force participation rate continued its upward march, increasing to 62.6% and matching a pandemic-era high. But that’s still below the February 2020 rate of 63.3%.
Even though labor force participation increased, the unemployment rate ticked down by 0.1 percentage points to 3.5%. That’s largely attributable to the strength in employment, according to Eugenio Aleman, Raymond James’ chief economist.
Average hourly earnings grew 0.3% from the month before, a slight uptick from the 0.2% seen in February. On an annual basis, earnings increases moderated to 4.2% from 4.6% the month before.
“The labor market continues to remain resilient and is a pillar of strength,” said Glassdoor’s Zhao. “The Fed is looking for balance from the labor market, and today’s report is a step in the right direction.”
This is the last BLS jobs report that will be released before the central bank’s next policymaking meeting on May 2-3 (the April jobs report drops on May 5).
As of Friday, markets are still largely expecting the Fed to raise rates by another quarter point, according to the CME FedWatch Tool.
Source : CNN