March Job Growth Blows Past Expectations

U.S. employers added 303,000 new jobs in March, exceeding economists’ forecasts by over 100,000, according to the latest employment report from the U.S. Bureau of Labor Statistics.

The unemployment rate dipped to 3.8 percent, but wages were contained, which could quell fears of further inflation.  

Data revisions to topline numbers—something people are coming to expect each month—were relatively small compared to recent months. The February total was revised down by 5,000 to 270,000 new jobs, while the January revision brought that monthly total up by 27,000 to 256,000.

“The labor market continued to exceed analysts’ expectations in March, further illustrating the resilience of the U.S. economy,” said Amy Glaser, senior vice president at Adecco. “We’re also at that time of year where seasonal events impact regional markets, such as the growth in hospitality in the South due to warm weather and spring break and more accounting jobs across the country as the tax deadline approaches.”

Becky Frankiewicz, president and chief commercial officer of Manpower Group North America, said that the labor market is showing continued strength, “still rebalancing from post-pandemic highs as employers take a more measured approach to hiring and prioritizing permanent hires for in-demand roles.”

She said the data shows signs of a Goldilocks labor market, with hiring slightly hotter than last year at this time, but cooler than last month and warmer than pre-pandemic.

Employment data is particularly important right now as the Federal Reserve weighs its next moves on when to cut interest rates. The monetary policy setter raised borrowing costs to their highest level in over two decades to combat pandemic-era inflation.

“This report is not a game-changer for the Federal Reserve,” said American Staffing Association chief economist Noah Yosif. “The solid numbers will likely not justify an early reduction in interest rates, nor do they indicate an overheating labor market which could complicate its efforts on inflation.”

Julia Pollak, chief economist at ZipRecruiter, said that the Federal Reserve “will likely be pleased to see this report consistent with its dual mandate of achieving both full employment and price stability. This report suggests those two goals are not currently at odds. We can have both at once. Three rate cuts are not off the table.”

Industry Breakdown

Employment growth came from many of the usual sectors that have powered gains in recent months, said Andrew Flowers, lead labor economist at Appcast.

That included health care employers with 72,000 new jobs, followed by government (71,000), leisure and hospitality (49,000), and construction (39,000).

“Construction had a notable uptick in job growth, growing at more than twice its pace from the past year, despite some loud calls not too long ago that construction employment would suffer in the face of high interest rates,” said Nick Bunker, economic research director for North America at the Indeed Hiring Lab. “The large contribution from nonresidential specialty trade contractors points toward a possible explanation for construction’s resilience—elevated factory construction activity spurred by recent federal policy.”

Flowers said that on the other hand, “manufacturing and information added exactly zero jobs each and professional and business services added just 7,000 jobs, while financial activities added 3,000. This is increasingly a labor market driven by demand for ‘standing-up jobs,’ rather than ‘sitting-down jobs,’ and perhaps beginning to look like a bifurcated labor market,” he said.

Frankiewicz said that there’s optimism for the future of manufacturing with improvements in the purchasing manager’s index and growing demand for skilled technicians who sit at the intersection of technology and production.

Pollak agreed, saying that with new orders and inventories rising, employment typically follows.

Staffing jobs in March were essentially flat, Yosif said.

Unemployment Dips

Unemployment has stayed under 4 percent for the last 26 months. The labor force participation rate moved higher to 62.7 percent, a gain of 0.2 percentage point from February. A broader measure that includes discouraged workers and those holding part-time positions for economic reasons held steady at 7.3 percent.

“Unemployment continues to trend near optimal levels, dampening prospects for a recession while indicating continued normalization within labor supply and demand,” Yosif said.

Bunker said that “upticks in the employment-population ratio and labor force participation suggest that demand for workers is not outstripping supply, like it was a few years back. Rather, while employer demand remains high, worker supply is rising to meet it, reversing some of the softening observed in the past few months.”

Notably, employment gains in March tilted heavily toward part-time jobs. The number of full-time workers fell by 6,000, while part-timers increased by 691,000.

Wages Hold

Average hourly earnings rose 0.3 percent on the month and were up 4.1 percent from a year ago.

“The wage growth data in the report will make the Fed smile,” Bunker said. “The reduced pace of wage gains will alleviate some concerns of reignited inflation driven in part by the strong labor market. And while it has slowed, wage growth remains faster than the pace of inflation, insulating workers from undue harm.”