The U.S. economy created 236,000 jobs in March, the Labor Department reported on Friday, marking the slowest pace of growth in more than two years as the labor market cools slightly.
Economists had expected the U.S. economy gained 240,000 jobs last month. The unemployment rate dropped slightly to 3.5%, compared with 3.6% in February and the 3.6% consensus call among economists surveyed by FactSet.
The March report shows employment growth slowing for the second consecutive month as rising interest rates, persistent inflation, and growing fears of recession weigh on employer demand for workers. Employment gains for January and February were both revised as well, showing job gains so far in 2023 were slightly weaker than previously thought.
Despite the cooling trend, however, the labor market broadly remains remarkably stable, and the March report showed a number of bright spots. For one, job gains were broad: Leisure and hospitality, government, professional and business services, health care, and social assistance all saw notable growth over the month.
The labor force participation rate, or the share of Americans working or looking for work, also climbed to 62.6%, its highest level since the pandemic hit. That suggests more workers are coming in off the sidelines and looking for work, which can help with wage inflation by reducing the need for companies to offer more money to attract staff.
On the wage front, March data came in roughly along the lines of what economists expected. Average hourly earnings climbed 0.3% last month, slightly faster than the prior month’s 0.2% pace. At an annual rate, wage growth slowed to 4.2% from 4.6% in February.
Overall, the report shows the labor market trending the way the Federal Reserve has long wanted to see, with job growth steady but slowing, earnings growth cooling off, and the participation rate rising. Nearly half a million people entered the labor force in March—a potential reflection of the pain inflation is causing on household budgets, but also a signal that employers could have an easier time hiring in the coming months.
Federal Reserve officials remain optimistic that they could potentially tamp down inflation by pushing down labor demand—as measured through hires and job openings—rather than by forcing companies to lay off staff. March’s data offers a hopeful sign that scenario could still be possible.
The latest data also offer little reason on their own for the Fed to feel the need to pause its pace of monetary-policy tightening. Ongoing strength in job creation gives the central bank room to continue fighting inflation without having to worry as much about the possibility of an imminent labor-market collapse.
Friday’s data is the last jobs report that will be released before the Fed’s policy committee meets again on May 2-3.
“The labor market continues to show resilience,” says Eric Merlis, managing director and co-head of global markets at Citizens Bank. “Today’s report should not deter the Fed from continuing its efforts to bring inflation to its target zone.”
Write to Megan Cassella at [email protected]
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