US economy gains 431,000 jobs in March and wages rise again as job market ‘goes forward’

The numbers: The US created a solid 431,000 jobs in March and the unemployment rate took another step toward a half-century low as companies pushed to add staff and more people entered the labor force looking for jobs.

Economists surveyed by The Wall Street Journal had forecast 490,000 new jobs, but the shortfall was made up by stronger than previously reported hiring in the first two months of the year.

The unemployment rate, meanwhile, slipped to 3.6% from 3.8%, the government said on Friday.

Just before the pandemic, the unemployment rate had sunk to a 50-year low of 3.5%.

March’s healthy jobs report underscores why the Federal Reserve is moving to raise a key short-term US interest rate this year after holding it near zero during the pandemic.

the inflation rate has skyrocketeded to a 40-year high of nearly 8% and rising wages are now adding to price pressures.

Hourly pay rose sharply again in March, bringing the 12-month increase to 5.6%, the highest rate since the early 1980s.

One caveat: The jobs report has also been less reliable over the past year due to the rise and fall of the pandemic. The estimates have been subject to major revisions months later.

Restaurants, hotels and other businesses that offer services to consumers are trying to hire more workers. The end of Covid restrictions is helping to boost sales.

Frederic J. Brown/Agence France-Presse/Getty Images

By any measure, the labor market is tight. Job openings are at record highs, layoffs are at record lows, and most companies want to hire

Stocks fell after the jobs report. Treasury yields remained slightly higher, with the 10-year rate above 2.36%.

Big picture: The buoyant labor market is the lifeline of the economy at a time of rising inflation and the global fallout from the Russian invasion of Ukraine.

As long as most Americans have jobs and feel secure in their jobs, economists say, the United States is likely to keep growing at a steady rate. Consumer spending is by far the biggest driver of the economy and people are still spending a lot of money.

However, the water is getting choppier.

Rising interest rates could slow sales of homes, cars and other big-ticket items and reduce business investment. The Ukraine conflict and the Covid lockdowns in China could also increase the upward pressure on prices.

Key details: For the second month in a row, a quarter of the job creation was in service-oriented businesses such as hotels, restaurants and other businesses that rely on large crowds and deal directly with customers.

Employment increased by 112,000 last month in the hospitality business. These companies saw a spike in sales after omicron faded and people went out more.

Employment also increased by 102,000 in professional businesses, 49,000 in retail, 38,000 in manufacturing and 19,000 in construction.

The size of the labor force grew by 418,000 in March, extending a recent trend in which several million people found work or started looking for work again.

The percentage of people in the workforce rose to a new pandemic high of 62.4% from 62.3%, though it is still a point below the pre-pandemic peak.

The economy would have about 1.4 million more workers if the so-called labor market participation rate were the same now as it was before the pandemic.

At the current rate of hiring, employment in the US is on track to surpass pre-pandemic levels in early summer.

Hiring in February and January was somewhat stronger than previously reported. Job gains in the two months increased by a combined 95,000.

Millions of workers have taken advantage of the tight labor market by switching jobs, often for higher wages or benefits or more flexibility. Some have left service-oriented jobs that require a lot of face-to-face contact with customers.

Over the past year, the average salary has increased 5.6%, one of the fastest increases since the early 1980s.

“Demand for labor is very strong, and with a smaller workforce than before the pandemic, businesses are competing for workers and driving up wages,” said senior economic adviser Stuart Hoffman of PNC Financial Services.

Bigger paychecks don’t look so good when high inflation is factored in. The cost of living jumped 7.9% in the 12 months ending in February.

Economists are watching closely to see if rising wages begin to add significantly to inflationary pressures. The last time the so-called spiral of wages and prices occurred was in the 1970s and early 1980s, when the United States experienced one of the worst episodes of inflation in its history.

Looking to the future: “The job market continues to move forward, despite significant headwinds brewing,” said Nick Bunker, director of economic research at Indeed.

“The March jobs report shows that employment remains the best part of the economy, especially for lower-wage workers,” said Robert Frick, corporate economist at Navy Federal Credit Union. “These show an economy accelerating as the pandemic subsides, with employment levels likely to reach pre-pandemic levels this summer.”

Market reaction: The Dow Jones Industrial Average DJIA,
+0.40%
and S&P 500 SPX,
+0.34%
turned lower in Friday trading.

Previous post Wealth Guide: Distressed With Tax Filing Work? Here are 10 strategies for meticulous tax planning in FY23!
Next post Analysis: Booming job growth is a double-edged sword for Joe Biden
%d bloggers like this: