The US economy continued to demonstrate its resilience in March, as the labor market added a remarkable 303,000 nonfarm payroll jobs, significantly surpassing the 214,000 expected by economists, according to data released Friday by the Bureau of Labor Statistics. Concurrently, the unemployment rate decreased to 3.8% from 3.9% in February, further underscoring the strength of the job market.
The impressive job gains and falling unemployment rate come as investors closely monitor the labor market for signs of cooling while hoping for overall strength to support Federal Reserve Chair Jerome Powell's current base case for three interest rate cuts later this year. In a recent speech at Stanford University, Powell referred to the labor market as "strong but rebalancing" after two months of robust job growth.
The report also showed that wages, a crucial metric for inflation pressures, increased 4.1% year-over-year, marking their lowest annual gain since June 2021. This modest wage growth, coupled with the strong job gains and lower unemployment rate, suggests that the labor market is maintaining its health while potentially easing inflationary concerns.
"This is another really strong report," said Lauren Goodwin, economist and chief market strategist at New York Life Investments. "This report and the February report showed some broadening in terms of job creation, which is a very good sign."
The labor force participation rate also picked up to 62.7% from 62.5% previously, while the average weekly hours worked ticked up from 34.3 to 34.4. These improvements in labor force participation and hours worked further highlight the underlying strength of the job market.
Job growth was widespread across various sectors, with healthcare leading the way by adding 72,000 jobs in March. Government employment also saw a significant increase, adding 71,000 jobs. The construction sector added 39,000 jobs, doubling its average monthly gain over the last 12 months. Other notable gains were seen in leisure and hospitality (49,000), retail trade (18,000), and the "other services" category (16,000).
Despite the overall positive news, the unemployment rate for Black people surged to 6.4%, a gain of 0.8 percentage points, tying the highest level since August 2022. In contrast, rates for Asians and Hispanics both fell sharply to 2.5% and 4.5%, respectively.
The Federal Reserve is closely monitoring the employment data as it weighs its next moves on monetary policy. The central bank aims to guide inflation back down to 2% annually, a goal that has proven elusive even as the rate of price gains has decelerated from its peak in mid-2022. Most measures have inflation running above 3%, though the Fed's preferred gauge is below that level.
Market pricing currently points toward the first interest rate cut coming in June, although several Fed officials, including Chair Jerome Powell, have indicated this week that they prefer to take a cautious, data-dependent approach. The Bureau of Labor Statistics is set to release its consumer price index reading for March on Wednesday, which will provide further insight into the state of inflation.
Despite some signs of cracks in the labor market, such as modest growth in household employment and a sharp decline in temporary employment, the household survey used to calculate the unemployment rate posted an even more robust gain in March, up 498,000, more than absorbing the 469,000 increase in the civilian labor force level.
