The U.S. labor market bounced back in March, with job creation much stronger than expected though the broader picture of a slow-growth labor market held intact.
Nonfarm payrolls rose a seasonally adjusted 178,000 during the month, a reversal from the 133,000 decline in February and better than the Dow Jones consensus estimate for 59,000, the Bureau of Labor Statistics reported Friday. February’s number was revised down by 41,000 while January was revised up by 34,000 to 160,000, putting the three-month average around 68,000.
The unemployment rate edged lower to 4.3%, though that was largely from a sharp reduction in the labor force.
“The bottom line is March was somewhat encouraging, but it’s been a rocky year for the labor market with almost no hiring since last April,” said Heather Long, chief economist at Navy Federal Credit Union. “The March data will keep the Federal Reserve on hold, but no one is declaring victory yet. It’s likely to be a tough spring for job seekers.”
As has been the case, health care was responsible for much of the growth, with the sector adding 76,000 jobs. A strike at health-care provider Kaiser Permanente in February hit the sector. The BLS said ambulatory health care services rose by 54,000, with 35,000 coming from the strike workers returning.
Construction saw an increase of 26,000, while transportation and warehousing posted a gain of 21,000.
On the downside, the federal government saw a loss of 18,000, while financial activities lost 15,000.
Though the unemployment rate posted a decline, the move largely came from a decline of 396,000 in the labor force. The share of working-age Americans in the labor force fell to 61.9%, its lowest since November 2021.
The survey of households, which is used to compute the unemployment rate, showed 64,000 fewer people holding jobs. An alternative unemployment figure that counts discouraged workers and those holding part-time jobs for economic reasons edged up to 8%. Long-term unemployment continued to be elevated, though the average weeks of unemployment fell to 25.3.
Wages also rose less than expected, with average hourly earnings up just 0.2% for the month and 3.5% from a year ago. Economists had expected respective readings of 0.3% and 3.7%. The annual increase was the lowest since May 2021. Hours worked declined 34.2, down one-tenth from February.
The U.S. stock market was closed in observance of the Good Friday holiday. Stock market futures were slightly negative following the report. The bond market continued to trade, with Treasury yields higher ahead of an early close.
The report comes amid a changing labor market, with the economy needing to add fewer jobs to keep the broader employment picture stable. The St. Louis Federal Reserve estimated recently that payroll growth of as little as 15,000 could keep the unemployment rate steady.
Federal Reserve officials have been weighing the jobs data as they plot their intentions regarding interest rates. Most policymakers have been content to watch the data unfold and take a patient approach, though a few have pushed for interest rate cuts to head off labor market weakness.
With inflation well above the Fed’s target and energy prices surging as the Iran war continues, markets expect little movement from the central bank this year. Following the jobs report, futures pointed to virtually no probability of a move at the April 28-29 Federal Open Market Committee meeting and a 77.5% probability the Fed will stay on hold through the end of the year, according to the CME Group’s FedWatch.
