The numbers: The U.S. added a robust 236,000 new jobs in March, defying the Federal Reserve’s hopes for a big slowdown in hiring as the central bank struggles to tame high inflation.
Economists polled by The Wall Street Journal had forecast 238,000 new jobs.
While the increase in hiring was the smallest in more than two years, the number of new jobs created last month was still stronger than is typically the case.
The unemployment rate, meanwhile, slipped to 3.5% from 3.6%.
There was some good news in the report for the Fed, though.
Wage growth continued to moderate closer to level the Fed would prefer, for one thing.
Hourly wages increased a mild 0.3% last month. And the increase in pay over the past year slowed again to a nearly two-year low of 4.2% from 4.6% in February.
What’s more, the share of people working or looking for work rose a tick to 62.6%. That’s the highest labor-force participation rate since the last month before the pandemic in February 2020.
When more people look for work, companies don’t have to compete as much for workers via higher pay.
Emerging evidence of slack in a muscular U.S. labor market could encourage the Fed to take a breather after a rapid series of interest-rate increases. Yet the reduced demand for labor could also be taken as a sign the economy is getting weaker.
Stocks rallied after the report.
The solid increase in employment last month followed a revised 326,000 gain in February and 472,000 in January, the government said Friday.
The U.S. has added a combined 1 million-plus new jobs in the first three months of the year.
Key details: About one-third of the new jobs created last month (72,000) were at service-side companies such as bars and restaurants whose employment still has not returned to pre-pandemic levels.
Americans are going out to eat a lot and spending relatively more on services than on goods.
Government employment increased by 47,000. Hiring also rose at professional businesses and in health care.
Retailers cut 15,000 jobs. Employment also fell slightly in manufacturing and construction.
Big picture: The ongoing tightness in the labor market could inflame inflation and even push the Fed to raise interest rates higher than expected to try to get prices under control.
Higher borrowing costs reduce inflation by slowing the economy, but most Fed rate-hike cycles since World War Two have been followed by recession.
on the flip side, he U.S. economy is starting to show more signs of deterioration due to a series of rapid Fed interest-rate increases in the past year.
Manufacturers have cut production and are arguably already in recession. And the much larger service side of the economy is under more stress lately. If these trends continue the economy — and inflation — are bound to slow.
The U.S. is still growing for now, however, and the labor market remains an oasis of strength.
Low unemployment and rising wages have allowed Americans to keep spending. And so far they’ve keep the economy out of a widely predicted recession.
Looking ahead: “The U.S. labor market is losing some momentum, but remains far too vibrant for the Fed to pause [rate hikes] in May,” said senior economist Sal Guatieri at BMO Capital Markets
“Although job growth is gradually slowing, it remains too strong for the Federal Reserve,” said Sal Guatieri of PNC Financial Services.
Market reaction:Â The Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
were set to open higher in premarket trades. The yield on the 10-year Treasury
TMUBMUSD10Y,
jumped to 3.35%.
This post was originally published on Market Watch
