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.
Contrary to predictions that it would remain at 3.6%, the jobless rate moved down to 3.5%. The drop came as labor force participation rose to its highest level since before the Covid outbreak.
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.
The average hourly wages rose by 0.3% along with the payroll gains, bringing the 12-month growth to 4.2%, the lowest level since June 2021. The typical work week shrank to 34.4 hours.
The head economist at ZipRecruiter, Julia Pollak, declared that “everything is moving in the right direction.” “Over the past two years, I have never seen a report align with expectations as much as today’s.”
Despite the fact that stocks are not traded on Good Friday, futures increased as a result of the story. Additionally, Treasury yields increased.
With a growth of 72,000 jobs, leisure, and hospitality led sectors although at a slower rate than the preceding six months’ 95,000 rates. Health care (34,000), professional and commercial services (39,000), and government (47,000) all experienced significant growth. 15,000 jobs were lost in the retail sector.
While the number for February was changed from the first reported 311,000 to 472,000, a decrease of 32,000 from the previous estimate, the number for January remained the same.
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 a growth of 577,000 jobs.
Data dating back to 1972 show that the unemployment rate for Black people fell by 0.7 percentage points to a record-low 5%.
The study comes amid a plethora of indications that job growth is slowing down.
Separate data released this week by businesses revealed that layoffs increased in March, up by about 400% from the previous year, while unemployment claims increased and private payroll growth appeared to decelerate. The number of job opportunities dropped below 10 million in February for the first time in almost two years, according to data from the Labor Department.
All of this came after a Fed attempt to soften the historically tight labor market lasted for a full year. In an effort to curb soaring inflation, the central bank increased its benchmark borrowing rate by 4.75 percentage points, the fastest tightening cycle since the early 1980s.
The job growth occurred in a month that saw the financial industry shaken by the failure of Silicon Valley Bank and Signature Bank. In the upcoming months, economists anticipate that the banking problems will have an impact.
The payroll poll was performed one week after the bank failed, which was far too soon for employers to have replied. As a result, the March figures basically represent a look back at the pre-SVB era. Ian Shepherdson, the chief economist of Pantheon Macroeconomics, said that the impact of tightened credit constraints will nevertheless soon manifest.
Several Fed officials stated this week that they are still dedicated to the fight against inflation and anticipate that interest rates will remain high, at least in the near future. Following the release of Friday’s report, market pricing changed, and traders now anticipate that the Fed will carry out one final quarter-point raise in May.
“The Federal Reserve should be very happy about this. When they make the next choice, they are not worried about the labor market, according to Pollak. The report from today is only a checkbox for them.
For the first time in close to two years, the number of open positions fell below 10 million in February.
However, investors are concerned that the Fed’s decision will likely lead to at least a brief recession, which the bond market has been predicting since mid-2022.
The New York Fed reported that as of the end of March, its most recent calculations indicated a 58% likelihood of a recession in the coming 12 months based on the spread between 3-month and 10-year Treasury notes. The GDP tracker maintained by the Atlanta Fed now shows a growth of just 1.5% in the first quarter, down from a rise of as high as 3.5% just two weeks earlier.