Economics

In March, there were 236,000 New Jobs Created, Which is About what was Anticipated

In March, there were 236,000 New Jobs Created, Which is About what was Anticipated

Although the growth of nonfarm payrolls in March was roughly in line with predictions, it revealed early symptoms of a downturn in the jobs market.

Payroll growth for the month was announced by the Labor Department on Friday at 236,000, below the upwardly revised 326,000 in February and below the Dow Jones estimate of 238,000.

The unemployment rate ticked lower to 3.5%, against expectations that it would hold at 3.6%, with the decrease coming as labor force participation increased to its highest level since before the Covid pandemic.

The total was the lowest monthly rise since December 2020, albeit it was near to what economists had predicted. This comes as the Federal Reserve works to reduce labor demand in order to restrain inflation.

Along with the payroll gains came a 0.3% increase in average hourly earnings, pushing the 12-month increase to 4.2%, the lowest level since June 2021. The average work week edged lower to 34.4 hours.

“Everything is moving in the right direction,” said Julia Pollak, chief economist for ZipRecruiter. “I have never seen a report align with expectations as much today’s over the last two years.”

Though the stock market is closed for Good Friday, futures rose following the report. Treasury yields also moved higher.

Leisure and hospitality led sectors with growth of 72,000 jobs, below the 95,000 pace of the past six months. Government (47,000), professional and business services (39,000) and health care (34,000) also posted solid increases. Retail saw a loss of 15,000 positions.

The March data effectively are a look back into the pre-SVB world; the payroll survey was conducted the week after the bank failed, far too soon for employers to have responded. But the hit from tighter credit conditions is coming.

Ian Shepherdson

While the February report was revised up from its initially reported 311,000, January’s number moved lower to 472,000, a reduction of 32,000 from the last estimate.

A different measure of unemployment that accounts for discouraged workers and people who work part-time jobs because of the economy saw a little decline to 6.7%. In comparison to the establishment survey, the household survey, which is used to compute the unemployment rate, showed growth of 577,000 jobs.

The unemployment rate for Blacks tumbled 0.7 percentage points to a record low 5%, according to data going back to 1972.

The report comes amid a bevy of signs that job creation is on wane.

In separate reports this week, companies reported that layoffs surged in March, up nearly 400% from a year ago, while jobless claims were elevated and private payroll growth also appeared to slow. The Labor Department also had reported that job openings fell below 10 million in February for the first time in nearly two years.

That all has followed a year-long Fed campaign to loosen up what had been a historically tight labor market. The central bank has boosted its benchmark borrowing rate by 4.75 percentage points, the quickest tightening cycle since the early 1980s in an effort to bring down spiraling inflation.

The job gains came during a month in which the failure of Silicon Valley Bank and Signature Bank rocked the financial world. Economists expect the banking troubles to have repercussions in coming months.

“The March data effectively are a look back into the pre-SVB world; the payroll survey was conducted the week after the bank failed, far too soon for employers to have responded. But the hit from tighter credit conditions is coming,” wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Several Fed officials said this week they remain committed to the inflation fight and see interest rates staying elevated at least in the near term. Market pricing shifted following Friday’s report, with traders now expecting the Fed to implement one last quarter percentage point hike in May.

“This is great news for the Federal Reserve. They don’t have any concerns for the labor market when they make the next decision,” Pollak said. “Today’s report is just a checkmark for them.”

Investors worry, though, that the Fed move are likely to result in at least a shallow recession, something the bond market has been pointing to since mid-2022.

In its most recent calculation, through the end of March, the New York Fed said the spread between 3-month and 10-year Treasurys are indicating about a 58% probability of recession in the next 12 months. The Atlanta Fed’s GDP tracker is indicating growth of just 1.5% in the first quarter, after pointing to a gain of as much as 3.5% just two weeks ago.