Amid skyrocketing inflation and concerns about an impending recession, the US economy added slightly fewer jobs than expected in March as the job market grew increasingly tight.
Nonfarm payrolls expanded by 431,000 in the month, while the unemployment rate was 3.6%, the Bureau of Labor Statistics reported Friday. Economists surveyed by Dow Jones were looking for 490,000 in payrolls and 3.7% for the level of unemployment.
An alternative measure of unemployment, which includes discouraged workers and those holding part-time jobs for economic reasons, fell to a seasonally adjusted 6.9%, down 0.3 percentage point from the previous month.
The movements in the unemployment rates came as the labor force participation rate rose a tenth of a percentage point to 62.4%, down 1 point from its pre-pandemic level in February 2020. The labor force grew by 418,000 workers and is now within 174,000 of the pre-pandemic state.
Average hourly earnings, a closely watched inflation metric, rose 0.4% in the month, in line with expectations. On a 12-month basis, pay rose nearly 5.6%, just above the estimate. The average work week, which is reflected in productivity, fell by 0.1 hours 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 this report went to zero, I would still say this is a very healthy job market.”
As has been the case for much of the pandemic era, leisure and hospitality led job creation with a gain of 112,000.
Professional and business services contributed 102,000 to the total, while retail trade increased 49,000 and manufacturing added 38,000. Other sectors that reported gains included social assistance (25,000), construction (19,000) and financial activities (16,000).
The household survey painted an even more optimistic picture, showing a total job gain of 736,000. That brought the total employment level to 408,000 from where it was before the pandemic.
Reviews from previous months were also strong. January’s total rose 23,000 to 504,000, while February was revised to 750,000 from the initial count 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 point to 6.2%, while the rate for Asians fell to 2.8% and for Hispanics 4.2%.
The numbers come with the economy at a critical time in its pandemic recovery phase. Although hiring at the top line has been strong, there remains a gap of about 5 million more open positions than available workers.
Growth, as measured by gross domestic product, is expected to be minimal in the first quarter. An inventory rebuild last year that helped fuel the biggest annual gain since 1984 is winding down, and multiple factors kept gains in check heading into 2022.
What has drawn most attention has been inflation, running at its fastest pace since the early 1980s and helping to constrain consumer spending as wage gains have failed to keep up with prices. . At the same time, the war in Ukraine has dampened confidence and added to supply chain problems. And rising interest rates show signs of a slowdown in the red-hot real estate market.
To combat inflation, the Federal Reserve is planning a series of interest rate hikes that would further slow growth.
Markets now anticipate rate hikes at each of the Fed’s remaining six meetings this year, likely starting with a half percentage point move in May and continuing with a full 2.5 percentage points before the end of 2022.
There was little in Friday’s report that would alter that perspective.
“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 have some raises in a row. If you actually get confirmation that wage growth is slowing at the margins, that might allow the Fed to reevaluate.”
The hotel industry has been one of the hardest hit during the pandemic. While hiring continues in restaurants, bars, hotels and the like, challenges remain.
Some 90,000 establishments closed in 2021, while sales fell 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 however falling to 5.9% in March, down 0.7 percentage points from a year ago. month.
Dirk Izzo, president and general manager of NCR Hospitality, said the industry is using a variety of tactics to survive. Technology has been a big factor in the world of the pandemic, with businesses facing labor shortages turning to handheld devices, QR code menus and other gadgets to improve customer service.
“We’re saying they’re having a really hard time staffing both the front and back of the house,” Izzo said. “In fact, they have taken tables out of restaurants because they can’t find the staff.”
Establishments that have run out of government subsidies are closing, while those that remain open are having to raise prices to combat inflation.
However, he said there is an air of optimism that with the pandemic abating and people returning to their usual behaviors, the industry can bounce back.
“I think people are going to come back from this stronger than before,” Izzo said. “They will have to incorporate more technology. I think it will be a positive for the industry. It will be a bumpy road.”