US employers created just 236,000 new jobs in March. This was below expectations, and indicates that the labor markets are cooling down amid the Federal Reserve’s year-long campaign of rate hikes to cool inflation.
According to the Bureau of Labor Statistics' March report on jobs, released Friday, the unemployment rate has dropped to 3.5%.
According to Refinitiv, economists expected a gain in jobs of 239,000 for the month. The unemployment rate was also expected to be 3.6%. This is the first time in 12 months a jobs report has come in below expectations.
The US labor market is cooling despite the fact that other parts of the economy are slowing down due to interest rate increases.
Daniel Zhao, Glassdoor’s lead economist said in a press release that the labor market entered March like a lion, with a banking crises and increased layoffs. It is now leaving like a lamb, with a strong jobs report. The labor market remains strong but is slowly gliding back to earth.
The total for March is down from the upwardly revised 326,000 new jobs in February and the monster number of jobs that was originally 517, but later revised to 472,000.
The 236,000 new jobs created in March are the lowest monthly gains since December 2020. It's the lowest monthly job gain since December 2019 if you exclude the losses that occurred during the first year after the pandemic.
The industries that continue to gain the most jobs are leisure and hospitality, government and health care. Retail trade, temporary workers, manufacturing, construction, and information services were among the industries reporting monthly job losses.
The Fed wants more slack on the labor market. As the economy recovers after the pandemic the demand for workers is far greater than the supply. This has led to increased 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.
In the last two-and-a half years, much ink was spilled about the reason workers went'missing'. Recent research has focused on Covid-19 death, reduced immigration and the aging population as the main culprits.
The labor market is now flooded with workers.
In February, the rate of participation in the labor force for workers aged 25 to 54 years old reached 83.2%. This is higher than the pre-pandemic level. Last month, the labor force participation rate increased to 62.6%, matching an all-time high. This is still lower than the February 2020 rate, which was 63.3%.
The average hourly earnings increased by 0.3% in comparison to the previous month, which is a small increase from the 0.2% recorded in February. Earnings growth on an annual basis moderated from 4.6% to 4.2% the month prior.
The average weekly work hours dropped from 34.5 to 34.4.
Zhao said that the labor market is resilient and a source of strength. The Fed wants to see a balanced labor market. Today's report represents a positive step.