The U.S. labor market recovered in March, and although the overall picture of a slow-growth labor market remained, job creation was much stronger than expected.
Nonfarm payrolls rose by a seasonally adjusted 178,000 jobs in the month, reversing a decline of 133,000 in February and beating the Dow Jones consensus estimate of 59,000, the Bureau of Labor Statistics said Friday. February’s figure was revised downward by 41,000, and January’s figure increased by 34,000 to 160,000, bringing the three-month average to about 68,000.
The unemployment rate declined slightly to 4.3%, but this was mainly due to a sharp decline in the labor force.
“The bottom line is that while March was somewhat encouraging, it’s been a tough year for the labor market with very little hiring since last April,” said Heather Long, chief economist at Navy Federal Credit Union. “The US Federal Reserve will remain unchanged in March’s economic data, but no one is declaring victory yet. It’s going to be a tough spring for job seekers.”
As before, much of the growth was driven by healthcare, which added 76,000 jobs. The industry was hit hard in February by a strike at medical services company Kaiser Permanente. The BLS said outpatient medical services increased by 54,000, 35,000 of which were from workers returning from strikes.
The construction industry saw an increase of 26,000 people, and the transportation and warehousing industry saw an increase of 21,000 people.
On the negative side, the federal government lost 18,000 jobs and financial operations lost 15,000 jobs.
Although the unemployment rate fell, this movement was mainly due to a decline of 396,000 people in the labor force. The share of working-age Americans in the labor force fell to 61.9%, the lowest level since November 2021.
The household survey, used to calculate the unemployment rate, showed 64,000 fewer people had jobs. The replacement unemployment rate, which counts discouraged workers and those taking part-time jobs for financial reasons, rose to 8%. Although the long-term unemployment rate continued to rise, the average number of weeks unemployed fell to 25.3 weeks.
Wages also did not grow as expected, with average hourly wages rising only 0.2% in the same month and 3.5% compared to the previous year. Economists had expected 0.3% and 3.7%, respectively. The annual growth rate was the lowest since May 2021. Working hours fell by 34.2 hours, a tenth decrease from February.
US stock markets were closed for the Good Friday holiday. Stock market futures turned slightly negative following this report. Bond markets continued trading, with U.S. Treasury yields rising ahead of an early close.
The report comes amid a changing labor market and the need to reduce job additions to stabilize the broader employment situation. The St. Louis Fed recently estimated that an increase in the number of employees of about 15,000 would be enough to keep the unemployment rate stable.
U.S. Federal Reserve officials are reviewing employment data and formulating intentions on interest rates. While most policymakers are content to watch the data unfold and respond patiently, some are advocating lower rates to prevent a downturn in the labor market.
With inflation well above the Fed’s target and energy prices soaring as the Iran war continues, markets expect the Fed to do little this year. Following the jobs report, futures markets said there was virtually no chance of a policy decision at the April 28-29 Federal Open Market Committee meeting, and a 77.5% chance the Fed would keep policy unchanged through the end of the year, according to CME Group’s FedWatch tool.
