The March jobs report marked the 27th consecutive month of strong job growth. While the pace of job creation has slowed, the strength of the labor market three years into the coronavirus pandemic still baffles experts.
American workers, and their spending ingenuity, have pushed the American economy through incredible obstacles: a banking crisis that brought down three institutions and threatened broader financial instability. higher interest rates that have cooled the housing market and parts of the financial industry; sweeping layoffs in the tech industry, with major employers cutting more than 160,000 jobs in three months; and persistent inflation that has made groceries and rents more expensive, especially for the country’s most vulnerable.
“The job market remains a pillar of strength in the economy,” said Daniel Gao, chief economist at Glassdoor. “Americans are employed, they get paid, which of course keeps consumer spending intact and keeps the rest of the economy running.”
A strong job market has become his worst enemy
Some sectors are fueling job market growth, while others have slowed. The largest job gains in March were in entertainment, hospitality, healthcare and government, sectors that have thrived in a pandemic recovery economy as consumers shift their spending away from goods toward services and experiences.
Leisure and hospitality added 72,000 jobs in March, with most of the growth in food services and bars. Employment in the industry remains below the pre-pandemic level of about 368,000 jobs.
The government added 47,000 jobs, but the sector is still working to make up for pandemic-era losses. Health care added 34,000 jobs, with the largest growth in home health care services and hospitals. Professional and business services added 39,000 jobs, with the largest gains in professional, scientific, and technical services.
Employment in other key sectors, including manufacturing, transportation, warehousing and retail, changed little between February and March.
Despite the strong economic winds, employers — many of whom have struggled to fill vacancies — continue to hire or at least retain the workers they have, even as business slows.
At Climax Packaging Machinery near Cincinnati, orders for beverage packaging machines and other industrial equipment are down about 40 percent from a year ago. But owner Darrell Rardon said it has become so difficult to find workers — especially welders, machine operators and electromechanical assemblies — that he is keeping his 26 employees and actively recruiting new ones.
“Am I a hoarding worker? You can say I’m guilty of that,” he said. “If the right person walks through the door today, we’ll hire him even though we don’t necessarily need him. It’s not something I’ve done before.”
Employers’ tendency to hold on to workers even as the economy slows “plays a very strong role” in supporting additional spending across the economy, according to Diane Swonk, chief economist at KPMG. The big question, she said, is how far employers can justify keeping extra workers on their payrolls if there is an ongoing decline in work.
“How long this ‘labor hoarding’ will last will test the resilience of the labor market,” said Sonck. “We just don’t know how far these patterns will shift: When are we going to go from hoarding to sticking to pieces? How willing are companies to keep people even as demand drops?”
The picture is further complicated by the Federal Reserve’s relentless efforts to quickly tackle rising prices. The central bank has raised interest rates eight times in the past year – most recently in March – in the hope that higher borrowing costs will slow the economy enough to bring down inflation. Policymakers continue to point to the strong but sluggish labor market as evidence that their efforts are working without causing irreparable harm to the economy.
And while some of the nation’s largest employers, including Walmart, McDonald’s, Microsoft and Amazon, are laying off thousands, the broader economy continues to add hundreds of thousands of jobs per month. Small businesses make the bulk of these employees: 8 by 10 Labor Department data shows that new hires in February were at companies with fewer than 250 employees.
Those small businesses, which have struggled to compete with the higher wages and better perks offered by big companies for most of the pandemic, are reluctant to let workers go. But economists say that may not be sustainable in the long term, especially as higher interest rates work their way through the economy.
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“We’re seeing labor hoarding today, but I’m concerned that these small businesses will also feel the biggest tightening in credit terms,” said Sonck. “If these companies — especially young companies — are running low on cash and don’t have access to the lines of credit they could have had a year ago, that could start to change the equation. How long can they afford to keep the extra workers?”
New orders slowed sharply early this year, said Rardon, the Ohio employer. Clients still request quotes, but they wait weeks, sometimes months, for a decision.
He said, “People get nervous.” They worry about what interest rates will do, what the economy will do. They’re really, really careful about how they spend their money.”
Although he would normally have reacted by cutting staff — or at least pausing hiring — Rardon said that’s now out of the question. Instead, he’s upping his paycheck, offering $500 referral bonuses and offering free pizza, pasta, and fried chicken on Fridays to keep his workers happy. (His biggest fear, he said, is losing them to General Electric, which has a factory near by. “They are the 800-pound gorillas in our labor market.” “They can pay what they want to pay if they need people.”)
“It’s never been easy to get really good people, but it’s never been that hard,” he said. “People who, 10 years ago, I would have left, are getting second and third chances now. It’s like, Can you please form? We can’t lose you.”
In fact, by many measures, the job market is still tighter than usual. The number of job openings has risen and the rate of workers leaving their jobs is well above pre-pandemic levels in February. The number of layoffs is down slightly, even though major companies have downsized. A backlog of consumer demand and a higher proportion of adults remaining outside the labor force emerging from pandemic lockdowns have kept the labor market tighter than the Fed wants to mitigate inflation.
In positive news for the Fed, however, the number of adults in the workforce increased by 480,000 workers in March. The decline in the unemployment rate in March reflects an increase in the number of workers finding and looking for jobs. Getting Americans to return to work after the pandemic has been the goal of policymakers looking to ease the labor market without causing widespread layoffs.
And in another bright spot, the black unemployment rate fell to 5% in March, a record low. The black unemployment rate has long exceeded the white unemployment rate in the United States.
There is also plenty of evidence that the job market has softened significantly since last spring. Average hourly wages rose more slowly in March, by 0.3 percent, or to $33.18 an hour, lagging the pace of wage increases for much of 2024. Job growth, while historically high, continues to decline.
There were 9.9 million job vacancies in February, down from 10.6 million in January. Meanwhile, the share of job vacancies advertising benefits such as health insurance, paid vacation, and retirement plans has begun to level off, according to data from the Indeed jobs website.
Many workers in industries facing labor shortages say staffing shortages have worsened working conditions and prompted people to quit.
Mayra Castañeda, 43, an ultrasound technologist at a hospital in Lynwood, Calif., said she has seen many of her younger colleagues quit, cut back hours or change industries because of the challenging working conditions and plentiful opportunities to earn higher starting wages in fast food and retail jobs. least stressful.
“We are severely understaffed. If you don’t have enough staff to do the job, patient care suffers,” Castaneda said. “Burnout and stress is the reality. You have to miss meals. You no longer have a relationship with your family.”
After 24 years at her job, Castaneda makes $60 an hour—far more than most of her colleagues. But she still considered quitting her job because of the growing burden and guilt that comes with caring for the sick without enough staff. “I hope there is some light at the end of the tunnel,” she said.