Amid soaring inflation and concerns about a looming recession, the US economy added slightly fewer jobs than expected in March as the labor market tightened further.
Nonfarm payrolls rose 431,000 for the month, while the unemployment rate was 3.6%, the Bureau of Labor Statistics reported Friday. Economists polled by Dow Jones were looking for 490,000 on the payroll and 3.7% for the level of unemployment.
Another measure of unemployment, which includes discouraged workers and those in part-time jobs for economic reasons, fell to a seasonally adjusted 6.9%, down 0.3 percentage points from the previous month.
The changes in unemployment measures came as the labor force participation rate rose by a tenth of a percentage point to 62.4%, less than a point from its pre-pandemic level. in February 2020. The labor force increased by 418,000 workers and now stands at 174,000 from the pre-pandemic state.
Average hourly earnings, a closely watched measure of inflation, rose 0.4% on the month, in line with expectations. Year-over-year, earnings rose nearly 5.6%, just above the estimate. The average workweek, which figures in productivity, fell slightly by 0.1 hour to 34.6 hours.
“Overall, nothing shocking about this report. There was nothing really surprising,” said Simona Mocuta, chief economist at State Street Global Advisors. “Even if that ratio came in at zero, I would still say it’s a very healthy job market.”
As has been the case for much of the Covid pandemic era, leisure and hospitality led job creation with a gain of 112,000.
Professional and business services contributed 102,000 in total, while retail trade increased by 49,000 and manufacturing by 38,000. Other sectors reporting gains included social assistance (25,000), construction (19,000) and financial activities (16,000).
The household survey painted an even brighter picture, showing a total employment gain of 736,000. This brought the total employment level down to within 408,000 of its pre-pandemic level.
Revisions from previous months were also strong. January’s total rose by 23,000 to 504,000, while February was revised to 750,000 from the original tally of 678,000. For the first quarter, job growth totaled 1.685 million, an average of nearly 562,000.
Among individual groups, the unemployment rate for Blacks fell 0.4 percentage points to 6.2%, while the rate for Asians fell to 2.8% and 4.2% to the Hispanics.
Focus on the Fed
The figures come with the economy at a critical juncture in its pandemic recovery phase. Although hiring on the top line has been strong, there remains a gap of around 5 million more job offers than available workers.
Growth as measured by gross domestic product is expected to be minimal in the first quarter. A stock rebuild last year that helped propel the biggest annual gain since 1984 is waning, and multiple factors have been controlling progress to start 2022.
The main eye-catching factor has been inflation, which has reached its fastest pace since the early 1980s and has helped to restrain consumer spending as wage gains have not been able to to follow prices. At the same time, the war in Ukraine dampened confidence and aggravated supply chain issues. And rising interest rates show signs of a slowing housing market on fire.
To fight inflation, the Federal Reserve is planning a series of interest rate hikes that would further slow growth.
Markets are now pricing in rate hikes at each of the Fed’s six remaining meetings this year, likely starting with a half-percentage-point move in May and continuing to total 2.5 percentage points before the end of 2022. .
There was little in Friday’s report that would change that outlook.
“The payroll 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 have a couple of hikes in a row. If indeed you get confirmation that wage growth is slowing at the margin, maybe that helps the Fed to reassess.”
Hospitality is looking for a turnaround
The hospitality industry has been among the hardest hit during the pandemic. Although hiring has continued in restaurants, bars, hotels, etc., challenges remain.
Some 90,000 establishments have closed in 2021, while sales are down about 7.5% from pre-pandemic levels, according to the National Restaurant Association. The industry remains around 1.5 million jobs below the February 2020 level, with the unemployment rate still falling to 5.9% in March, down 0.7 percentage points from the last month.
Dirk Izzo, president and CEO of NCR Hospitality, said the industry uses a variety of tactics to survive. Technology has been a big factor in the pandemic world, with businesses coping with worker shortages by turning to wearable devices, QR-coded menus and other tools to improve customer service.
“We’re saying they’re really struggling to fully staff both the front and back of the house,” Izzo said. “They’ve actually removed tables from restaurants because they can’t find the staff.”
Establishments that no longer have government subsidies close their doors, while those that remain open must raise prices to fight inflation.
Nonetheless, he said there was an air of optimism that, with the pandemic easing and people returning to their usual behaviors, the industry can rebound.
“I think people are going to come back stronger than before,” Izzo said. “They’re going to have to put more technology into it. I think it’s going to be positive for the industry. It’s just going to be a bumpy road.”