By Andrew Moran
The U.S. economy added 236,000 new jobs in March, slightly below the market estimate of 238,000, according to the Bureau of Labor Statistics (BLS). This was also down from the 326,000 new jobs that were created in February and represented the lowest print in 27 months.
The unemployment rate edged down to 3.5 percent, down from 3.6 percent. The labor force participation rate edged up to 62.6 percent, up from 62.5 percent.
Average hourly earnings rose 0.3 percent month-over-month, up from 0.2 percent. On a year-over-year basis, average hourly earnings slowed to 4.2 percent, down from 4.6 percent.
Leisure and hospitality led the way, with 72,000 new jobs. This was followed by government employment (47,000), professional and business services (39,000), and health care (34,000). Transportation and warehousing added 10,000 positions.
The retail sector lost 15,000 jobs while manufacturing payrolls remained relatively flat.
The number of people employed part-time for economic reasons was flat at 4.1 million, and the number of people not in the labor force who want employment was unchanged at 4.9 million. The number of persons working two or more jobs rose to 7.979 million, up from 7.904 million. Self-employed workers declined to 9.839 million, down from 10.119 million.
Peter Schiff, the chief economist and global strategist at Euro Pacific Capital, tweeted that the jobs data was stronger because of new government workers.
“The only reason the Mar. jobs report wasn’t well below estimates was that governments hired a lot more workers than expected,” he said. “When the private sector creates #jobs, businesses absorb the cost. But when governments create jobs taxpayers pick up the cost. That makes things worse.”
Meanwhile, there was little reaction in the financial markets on Friday, with the leading benchmarks flat in pre-market trading.
The U.S. Dollar Index (DXY), a measurement of the greenback against a basket of currencies, surged above 102.00.
The U.S. Treasury market was mostly up at the end of the trading week. The benchmark 10-year yield rose about 5 basis points to nearly 3.36 percent.
“Though job openings dropped this month and will likely continue to slow in the coming months, the labor market remains resilient on several fronts, particularly in COVID-sensitive verticals,” said Cody Harker, the head of data and insights at recruitment marketing firm Bayard Advertising, in a statement. “Leisure and hospitality continue to dominate all sectors, underscored by healthy consumer spending on services.”
Cracks in the Job Market
Leading up to the March jobs report, there were indicators that the Federal Reserve’s tightening efforts have led to cracks forming in the U.S. labor market.
The number of job openings fell by 632,000 to 9.931 million in February. This was the first time that job openings fell below 10 million since May 2021.
Last month, private payroll growth climbed 145,000, down from an upwardly revised 261,000 in February and below the forecast of 200,000, according to the ADP National Employment Report. Job losses were seen in financial activities (negative 51,000), professional and business services (negative 46,000), and information (negative 7,000).
“Our March payroll data is one of several signals that the economy is slowing. Employers are pulling back from a year of strong hiring and pay growth, after a three-month plateau, is inching down,” said Nela Richardson, the chief economist at ADP, in a statement.
U.S.-based employers announced nearly 90,000 job cuts in March, up 319 percent year-over-year, data from Challenger, Gray & Christmas, Inc. show. This was also up from the 77,770 planned layoffs in the previous month.
“We know companies are approaching 2023 with caution, though the economy is still creating jobs. With rate hikes continuing and companies’ reigning in costs, the large-scale layoffs we are seeing will likely continue,” said Andrew Challenger, the senior vice president of Challenger, Gray & Christmas, Inc., in a statement.
In addition, the Institute for Supply Management’s (ISM) Manufacturing and Services Purchasing Managers’ Index (PMI) readings highlighted slowing employment growth in March.
The ISM Manufacturing Employment sub-index contracted for the second straight month to 46.9, while the ISM Services Employment sub-index fell for the first time since December.
Some economists have argued that a resilient labor market has prevented the United States from slipping into a recession.
A new report from Morning Consult Economic Intelligence showed that the share of U.S. adults reporting low income or pay dropped 9.5 percent in March, down from 9.7 percent in February,
Overall, there are roughly two open positions for every out-of-work job seeker, “and the share of employed U.S. adults who are actively applying for new roles has risen in recent months,” the report stated.
“At the margins, there are some signs that the labor market is cooling as labor force participation edges higher, wage growth moderates and businesses rein in hiring plans. However, a full year after the Federal Reserve began raising interest rates, most labor metrics still reflect a robust labor market,” Morning Consult economists wrote.
But with weak economic data in recent weeks and a potential slowdown in the jobs arena, conditions might be changing, says Dan Kowalski, vice president of CoBank’s Knowledge Exchange.
“Several indicators point to an oncoming recession, with inverted bond yields being the most closely watched,” he said in a statement. “But predicting the timing of that slowdown has been particularly tricky in the face of a resilient labor market. We still expect a shallow, relatively short recession in 2023, but probably not before late in the third quarter or into the fourth.”
According to the Federal Reserve’s Survey of Economic Projections (pdf), the unemployment rate is seen rising to 4.5 percent this year, down from the December estimate of 4.6 percent.
Fed Chair Jerome Powell acknowledged in his semi-annual report to Congress that the central bank no longer anticipates killing labor demand to vanquish inflation.