WASHINGTON, April 7 (Reuters) – U.S. employers maintained a solid pace of hiring in March, pushing the unemployment rate back down to 3.5% and signaling labor market flexibility that will keep the Federal Reserve on track to raise rates. Interest again next month. .
The closely watched employment report released by the Labor Department on Friday showed that annual wage gains slowed but remained too high to meet the US central bank’s 2% inflation target. The release capped a week dominated by data, including upward revisions to weekly state unemployment and continuing claims, which indicated labor market conditions were softening.
The tightening of the labor market has drawn more people into the workforce, with 480,000 entering last month, which could help restrain wage growth further. The unemployment rate for blacks has fallen to an all-time low of 5.0%.
Rather than an abrupt and drastic end to the jobs binge of the past two years, the country’s labor market is instead gradually turning out the lights and stopping the music in a mostly smooth transition from weekends to weekdays that seems, for the time being, to be sustainable and healthy. Quite a lot,” said Nick Pinker, Head of Economic Research at Indeed Hiring Lab.
A survey of enterprises showed non-farm payrolls increased by 236 thousand jobs last month. Data for February has been revised upwards to show 326,000 jobs added instead of the 311,000 previously reported. Job growth averaged 345,000 per month in the first quarter, more than triple the speed needed to keep up with growth in the working-age population.
Some of the slowdown in hiring reflected further fading from unseasonably mild weather in January and February.
Economists polled by Reuters had expected salaries to rise by 239,000. Estimates range from 150,000 to 342,000.
The leisure and hospitality industry accounted for the bulk of the employment gain, adding 72,000 jobs, most of these jobs in restaurants and bars. Employment in the leisure and hospitality sector remains 368,000 jobs below its pre-pandemic level.
Restaurants and bars have been the main drivers of job growth since the recovery from the pandemic.
Government employment increased by 47,000. Employment in the government sector is 314,000 fewer than its level in February 2020. There were increases in employment in professional and business services, as well as in health care and transportation and warehousing. But manufacturing payrolls fell for the second month in a row. Retailers shed 14,600 jobs, while construction employment fell by 9,000.
While last month’s job gains painted a picture of an economy continuing to expand, the stakes are rising. Credit conditions were tightened after the failure of two regional banks in March, which could make it difficult for small businesses and households to obtain financing.
Business sentiment is at sluggish levels and consumer confidence remains weak. Economists expect the labor market to soften significantly starting in the second quarter as companies respond more to slowing demand caused by higher borrowing costs.
Right now, the job market is not collapsing. Average hourly earnings increased 0.3% in March after rising 0.2% in February. In the twelve months through March, wages increased 4.2% after rising 4.6% in the twelve months through February. Annual wage growth slows as last year’s big increases are excluded from the calculations.
The dollar rose against a basket of currencies, while US Treasury rates rose. The US stock market is closed for the Good Friday holiday.
Strong data
The average workweek fell 0.1 hours to 34.4 hours, reflecting a decline in the commodity-producing industry. A shorter work week with 10,700 fewer temporary help jobs likely heralds slower job gains ahead.
Fed officials will now wait for inflation data later this month to gauge the impact of the year-long tightening campaign.
“There was certainly nothing in today’s report that raises concerns about near-term recession risks,” said Michael Feroli, chief US economist at JPMorgan in New York. “We still look for a 25 basis point hike at the May meeting, followed by a long pause. We see some risk from another rally in June.”
Financial markets are leaning towards the central bank increasing interest rates by another 25 basis points at its May 2-3 policy meeting, according to CME Group’s FedWatch tool.
The US central bank last month raised its benchmark interest rate by a quarter of a percentage point, but indicated it was about to pause further rate hikes in a sign of financial market pressures. It has raised the interest rate by 475 basis points since last March from a near zero level to the current range of 4.75%-5.00%.
Details of the household survey from which the unemployment rate was derived were upbeat. The unemployment rate has returned to its lowest level in 50 years, having fallen from 3.6% in February.
The drop in the black unemployment rate was the largest since September 2024 and pushed it to the lowest level since 1972, when the government began tracking the series. The drop from 5.7% in February was driven by women.
said Bill Adams, chief economist at Comerica Bank in Dallas.
Domestic workers increased by 577,000 jobs. Even more encouraging, the labor force participation rate, or the share of working-age Americans who have a job or are looking for a job, rose to 62.6% from 62.5% in February. The black participation rate has risen to the highest level since 2008.
The employment-to-population ratio, seen as a measure of an economy’s ability to create jobs, rose to 60.4% from 60.2% the previous month. The percentage of those between the ages of 25 and 54 who are employed reached 80.7%, the highest level since May 2001.
“Time will tell if tighter credit conditions slow the economy in the coming months,” said Christopher Rupke, chief economist at FWDBONDS in New York.
(Reporting by Lucia Moticani) Editing by Chizu Nomiyama and Paul Simao
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