The US economy added slightly fewer jobs than predicted in March, as the labour market tightened amid rising inflation and fears of an approaching recession.
The Bureau of Labor Statistics reported Friday that nonfarm payrolls increased by 431,000 for the month, while the unemployment rate remained at 3.6 percent. Dow Jones polled economists, who predicted 490,000 people on payrolls and 3.7 percent unemployment.
An alternative measure of unemployment, which includes discouraged workers and those working part-time for economic reasons, declined 0.3 percentage points to 6.9 per cent, seasonally adjusted, from the previous month.
The changes in unemployment rates occurred while the labour force participation rate rose by a tenth of a percentage point to 62.4 per cent, bringing it within one point of its pre-pandemic level in February 2020. The labour force increased by 418,000 workers, bringing it within 174,000 workers of its pre-pandemic level.
Average hourly wages, a frequently monitored inflation indicator, gained 0.4 percent month over month, as expected. Over the course of a year, compensation climbed by nearly 5.6 per cent, little more than expected. The average work week fell by 0.1 hour to 34.6 hours, which has an impact on production.
“All in all, nothing shocking about this report. There was nothing that was really surprising,” said Simona Mocuta, chief economist at State Street Global Advisors. “Even if this report came in at zero, I would still say this is a very healthy labor market.”
Leisure and hospitality, as has been the case for much of the epidemic era, led job creation with 112,000 new jobs.
Professional and business services contributed 102,000 to the total, while retail and manufacturing both increased by 49,000 and 38,000, respectively. Social assistance (25,000), construction (19,000), and financial activities were among the other industries that record gains (16,000).
The home survey revealed an even more upbeat picture, with a total gain of 736,000 jobs. This increased total employment to within 408,000 of its pre-pandemic level.
Revisions from previous months were likewise impressive. The number for January increased by 23,000 to 504,000, and the total for February was revised up to 750,000 from the previous count of 678,000. Job creation totaled 1.685 million in the first quarter, an average of approximately 562,000 per month.
The figures come at a critical stage in the economy’s epidemic recovery. Despite the fact that top-line hiring has been high, there is still a 5 million-plus difference between job vacancies and available workers.
In the first quarter, growth as measured by gross domestic product is predicted to be moderate. Last year’s inventory building, which helped push the greatest annual rise since 1984, is winding down, and numerous factors are holding back progress in 2022.
Inflation, which is at its highest level since the early 1980s and is limiting consumer spending since wage growth hasn’t kept pace with price increases, has gotten the most attention.
At the same time, the conflict in Ukraine has lowered morale and exacerbated supply-chain problems. Rising interest rates are also causing the hot housing market to cool.
The Federal Reserve is proposing a series of interest rate hikes to battle inflation, which will restrict GDP even more.
Markets now expect rate hikes at each of the Fed’s six remaining meetings this year, beginning with a half-percentage-point hike in May and extending to a total of 2.5 percentage points by the end of 2022.
There was little in Friday’s report to change that assessment.
“The wage picture is critical,” said Mocuta, the State Street economist. “The report doesn’t really change the short-term trajectory, the idea that we’re going to get a few hikes in a row. If indeed you get confirmation that the wage growth is slowing at the margins, that maybe allows the Fed to reassess.”
(Adapted from FT.com)