Another month of stronger-than-expected job growth occurred once again.
Employers added a seasonally adjusted 303,000 jobs in March, and the unemployment rate fell to 3.8% from 3.9% in February, the Labor Department said Friday. While predictions of a recession were once widespread among experts, those expectations are now increasingly rare.
This was the 39th consecutive month of employment growth. And employment levels are now more than 3 million jobs higher than the nonpartisan Congressional Budget Office predicted just before the pandemic hit.
This resilient data has led economists and market investors to believe that despite the high interest rates of the past two years, the U.S. economy has reached a healthy equilibrium where a steady rotation of commercial activity, job growth, and rising wages coexist. The family's confidence has generally increased.
Inflation exceeded wage growth from late 2021 to early 2023, but that is now firmly in place, even though wage growth will slow from its impressive growth rate in 2022. That seems to be changing. Average hourly wages for workers rose 0.3% in March from a year earlier. From March 2023, he increased by 4.1%.
“The few areas where you can criticize this labor market are melting away,” said Andrew Flowers, chief labor economist at recruitment agency Upcast.
Some worry that as a strong labor market recovery gives way to slower expansion, job growth will be focused primarily on less cyclical sectors such as government jobs and health care. The report is driven by growth in healthcare, including hospitals, nursing homes, residential care facilities, and outpatient services. But job growth remains broad-based for now.
The private sector added 232,000 jobs overall. The construction industry added 39,000 jobs in March, about twice the average monthly increase over the past year. Employment in the hospitality and leisure industries, which fell sharply during the pandemic, continues to recover and is now above February 2020 levels.
Joe Davis, Vanguard's global chief economist, said the “continued dynamism” comes from “household balance sheets strengthened by pandemic-related fiscal policy and a virtuous cycle of mutually reinforcing employment growth, wages, and consumption.” He said that
President Biden declared the report a “milestone,” noting that the economy has created 15 million jobs since he took office and launched a series of programs aimed at spurring growth. “We have come a long way, but we will never stop fighting for hardworking families,” he said in a statement.
Data analysts said stronger-than-expected business productivity and labor force participation rates also helped. Corporate profits are at an all-time high, according to recent data from the U.S. Bureau of Economic Analysis.
Fed officials, who raised interest rates rapidly in 2022 and early 2023 to combat inflation, have expressed cautious optimism that they are close to achieving their goals of low unemployment and stable prices.
Inflation has fallen significantly from a peak of 7.1%, according to the Fed's recommended standards. However, it rose to 2.5% in February, still 0.5 percentage points short of the Fed's target. Others worry that rising oil prices and geopolitical turmoil could upend the delicate situation.
Global events are not the only reason to be cautious.
Guy Berger, director of economic research at the Burning Glass Institute, which studies the labor market, said that while the layoff rate is near an all-time low, other data on employment, based on past business cycles, “probably suggests the unemployment rate is just under 5 percent. They are in agreement,” he said. .
Some labor economists also fear that higher borrowing costs for consumers and businesses, raised by the Fed, could cause cracks in certain parts of the economy as businesses have to endure longer. I believe.
Nancy Vanden Houten, chief U.S. economist at advisory firm Oxford Economics, said strong job growth will encourage the Fed to lower interest rates (which it expects to do three times this year) and add insurance to its ongoing policies. He said there was no need to prevent this. Expand your business.
“The Fed doesn't need to see weakness in the labor market to begin cutting rates, but it will act based on wage growth and inflation indicators,” he said. We expect to see further progress.” Research notes.
Despite the narrative among leading experts about the U.S. economy oscillating between jubilant relief and stubborn concerns that the best days of this business cycle are over, overall the labor market remains weaker than it has been since 2022. It is consistently booming. This happens almost without any problems.
But the underlying details provide insight into potential changes that could affect the mix of employment and commercial activity going forward.
Employment growth remains weak in sectors such as professional and business services, finance, and information. Together, these three sectors added just 10,000 jobs in March, said Daniel Chao, chief economist at career site Glassdoor. It's another sign of how white-collar employers have become more selective since hiring surged during the pandemic.
“Companies are prioritizing quality over quantity and are selective in hiring,” said Tom Gimbel, CEO of LaSalle Network, a Chicago-based staffing and recruiting firm.
The advantage is that these workers are most likely to have high incomes to begin with. Homeowners with low-cost fixed-rate mortgages that protect them from rent inflation, and investors whose portfolios have been surprisingly strong since the fall.
Meanwhile, the job market is less hot than it was a few years ago, as low-wage workers are changing jobs for better pay and benefits that often include double-digit percentage raises. But the market still offers an opportunity for profit growth not seen since the late 1990s, according to the Fed's key indicators.
In an interview with Bloomberg in March, Liz Everett Krisberg, president of the Bank of America Research Institute, pointed out a crucial reality for households: The monthly median savings and checking account balance is higher than all income. The level tracked by banks has increased by more than 40 percent compared to 2019.
Delinquencies among subprime car and credit card borrowers are on the rise. However, the overall proportion of household disposable income that goes toward debt repayment remains below pre-pandemic lows.
Mark Zandi, chief economist at Moody's Analytics, has been one of the most bullish financial commentators since recession fears began in 2022.
But a year ago, when the local banking system started to tremble a bit due to interest rate shocks, he became increasingly worried. Mr. Zandi advised his son, an entrepreneur, that he was unlikely to get a credit line, probably because bank loans would be tight.
“He knocked on JPMorgan Chase's door and they gave him a loan within two hours,” Zandi said with a laugh. “And, you know, it was a pretty big line.”
This event represents a change in the business landscape that has gone largely unnoticed. The proportion of banks tightening lending to small and medium-sized businesses has fallen significantly since the middle of last year, when economic growth far exceeded expectations. This trend coincides with a growing belief among business leaders that a recession is not imminent and that expansion may be prolonged, making bets on startups more attractive. We are doing so.
Dissatisfaction with cumulative price increases over the past three years continues to rattle consumer sentiment. But Daniel Alpert, senior fellow in financial macroeconomics at Cornell Law School and founding managing partner of investment bank Westwood Capital, says that in many ways, consumers and businesses are still He said he was in good health.
He said that “but for the post-pandemic inflation spike and high interest rates,” the economy “would have been hailed as one of the greatest turnarounds in history.”