In March, job growth reached a total of 236,000, closely aligning with expectations, but indicating a slowing hiring pace. The Labor Department reported that payrolls increased by 236,000, just below the estimated 238,000 and lower than the revised 326,000 in February. The unemployment rate also slightly decreased to 3.5%, surpassing expectations, as labor force participation reached its highest level since before the Covid pandemic. However, despite meeting economist predictions, this is the smallest monthly gain since December 2020, suggesting that efforts by the Federal Reserve to cool inflation have started impacting labor demand.
Job Growth in March
In March, job growth totaled 236,000, which was near expectations as the hiring pace began to slow down. While this figure was in line with economists’ predictions, it marked the lowest monthly gain since December 2020. The Federal Reserve has been making efforts to slow down labor demand in order to cool inflation, and this has had an impact on the pace of job growth.
Labor Market Slowdown
Nonfarm payrolls in March rose about in line with expectations, increasing by 236,000. This figure fell slightly below the upwardly revised 326,000 jobs added in February. The slowdown in job growth is a concerning sign for the labor market, as it indicates a potential slowing of economic activity.
Unemployment Rate
The unemployment rate in March ticked lower to 3.5%, below expectations that it would hold at 3.6%. This decrease in the unemployment rate came as labor force participation increased to its highest level since before the Covid pandemic. This is a positive sign for the economy, as it shows that more people are actively seeking employment.
Federal Reserve’s Efforts
The Federal Reserve has been trying to slow labor demand in order to cool inflation. Their efforts have resulted in the lowest monthly gain in job growth since December 2020. The central bank has been cautiously raising interest rates to curb inflation, which has had an impact on the pace of job creation.
Average Hourly Earnings
Average hourly earnings saw a 0.3% increase in March, pushing the 12-month increase to 4.2%, the lowest level since June 2021. This slower growth in wages suggests that the labor market may be cooling down. It also indicates that there may be less upward pressure on inflation, as wage growth typically contributes to rising prices.
Industry Breakdown
In terms of industry breakdown, the leisure and hospitality sector led with 72,000 job growth in March. This was below the average pace of the past six months, indicating a potential slowdown in this sector. Other sectors that saw solid increases include government (47,000), professional and business services (39,000), and health care (34,000). However, the retail sector saw a loss of 15,000 positions, which is a concerning sign for this industry.
Signs of Job Creation Slowing
There are several signs that job creation is slowing down. In March, layoffs surged, up nearly 400% from a year ago. Additionally, jobless claims were elevated, and private payroll growth appeared to be slowing. The Labor Department also reported that job openings fell below 10 million in February for the first time in nearly two years. These indicators suggest that the labor market may be entering a phase of slower job creation.
Federal Reserve’s Inflation Fight
Despite the signs of a slowing labor market, the Federal Reserve remains committed to its fight against inflation. They have been raising interest rates in an effort to cool down the economy and prevent prices from rising too rapidly. Fed officials expect interest rates to stay elevated at least in the near term. However, the market remains skeptical of the Fed’s actions and their ability to effectively combat inflation.
Concerns of Recession
Investors are growing concerned that the Federal Reserve’s actions could result in at least a shallow recession. The bond market has been indicating a potential recession since mid-2022, and the probability of a recession in the next 12 months is estimated to be around 58%. These concerns highlight the delicate balance that the Fed must strike in managing inflation while avoiding an economic downturn.
Market Growth Expectations
The Atlanta Fed’s GDP tracker is indicating growth of just 1.5% in the first quarter, which is significantly lower than the gain of as much as 3.5% predicted just two weeks ago. This suggests that the economy may be slowing down more than originally anticipated. Current pricing in the market indicates a slight probability of one last rate hike in May, but with reductions totaling about a full percentage point by the end of 2023. This uncertain outlook reflects the market’s uncertainty about the future direction of the economy.
Overall, the job growth in March was near expectations, but the slowdown in hiring pace and other indicators suggest that the labor market may be entering a phase of slower job creation. The Federal Reserve’s efforts to combat inflation and the concerns of a potential recession add further uncertainties to the economic outlook. It will be important to closely monitor future data on job growth and economic indicators to assess the health of the labor market and the overall economy.
