The US added 236,000 jobs in March, a sign of gradual weakening in the labor market as the effects of the Federal Reserve’s interest rate increases start to be seen in the economy.
Friday’s closely watched jobs report provides data that will heavily influence the Fed’s decision to either halt or continue interest rate hikes at its next board meeting in early May. The non-farm payrolls data published by the Bureau of Labor Statistics’ (BLS) suggested a slowdown in the jobs market in the world’s largest economy last month, after an upwardly revised 326,000 jobs were added in February and 504,000 in January.
The March number was also 3,000 lower than the 239,000 forecast by economists.
The unemployment rate dropped 0.1% to 3.5%.
Fewer jobs were added to the leisure and hospitality and healthcare sectors than in previous months, though the industries are still trending up in job availability. Government and professional and business services continued to grow at a similar paces to previous months.
“The 236,000 gain in non-farm payrolls in March adds to the evidence that the economy’s strong start to the year was partly weather related, with momentum fading again,” said Andrew Hunter, deputy chief US economist at Capital Economics.
“With the sharp fall in job openings and upward trend in jobless claims also pointing to cooling labor demand, and the drag from the recent banking turmoil still to feed through, we expect jobs growth to slow more sharply soon.”
Ahead of the government’s job survey other reports gave hints that the labor market, while still growing, is cooling from highs seen over the last two years. BLS’s Job Openings and Labor Turnover Survey last week showed that employers are starting to slow the pace of hiring. There were less than 10m active job openings by the end of February for the first time in nearly two years.
Payroll company ADP released its national employment report on Wednesday, showing that private employers added 145,000 jobs in March – down from the 261,000 jobs in the private sector added in February.
Meanwhile, a report released Thursday from outplacement consultant firm Challenger, Gray & Christmas showed an uptick in job cuts in March. Last month, US-based employers cut 89,703 jobs – a 15% increase compared with the 77,770 cuts that were seen in February. The losses were predominantly seen in the tech sector, which saw mass layoffs after companies over-hired during the pandemic, followed by the job cuts in the financial sector.
Ahead of Friday’s report, stock markets – which are closed on Friday in observance of Good Friday – wavered on Thursday’s as investors showed ambivalence over the incoming report and what it could mean for interest rates.
The Fed will have to weigh the latest job report against incoming inflation news as it decides whether or not to hike interest rates again. Inflation reached a 40-year high last year and while it is declining, it remains stubbornly high.
The Fed chair, Jerome Powell, has consistently said getting prices under control is the central bank’s top priority. Despite the banking crisis caused by the collapse of Silicon Valley Bank, the Fed went ahead and increased interest rates by a quarter point last month, bringing rates to 4.75% to 5% – its ninth consecutive raise and the highest since 2007.
When discussing the Fed’s decision to increase rates, Powell cited economic data from January, including the jobs report, that showed the economy was not slowing down as much as the Fed would like.
Powell acknowledged the banking crisis’s effect on the broader economy, but remained adamant on the Fed’s goal to bring inflation down to 2%. Inflation in February slowed to 6%, but Powell said the rate is still far from their goal. March’s inflation figures will be released on 12 April.
Some economists have criticised Powell for taking such a stringent approach to lowering inflation, saying that being too hawkish could push the economy toward a recession.
“The effects of the Federal Reserve’s unrelenting rate hikes are apparent: job growth is slowing and unemployment insurance claims are up, now breaking 200,000 a week,” said Chris Becker, senior economist at Groundwork Collaborative. “But the labor market is the wrong target for the Fed because workers and their wages have not driven inflation – supply disruptions and corporate profits have. Additional rate hikes will only edge us closer to a painful, avoidable recession.”
Still, Powell has continued to reiterate that lowering inflation is the Fed’s priority, and that recent coolings have not been enough.
“Inflation remains too high, and the labor market continues to be very tight,” Powell said at a press conference 22 March, after the latest quarter-point increase. “My colleagues and I understand the hardship that high inflation is causing, and we remain strongly committed to bringing inflation back down to our 2% goal.”
