Hiring slowed in March as U.S. job market shows signs of cooling
Employers across the U.S. continued to hire at a steady pace last month, but the labor market showed signs of cooling in the face of the Federal Reserve's efforts to slow the economy.
The economy added 236,000 jobs in March, the Labor Department reported Friday, in line with forecasters' expectations of about 240,000 payroll gains. The unemployment rate ticked down to 3.5%, from 3.6% in February. Revised data also showed that hiring at the start of the year was somewhat slower than the blockbuster figures initially estimated.
"The 236,000 gain in non-farm payrolls in March adds to the evidence that the economy's strong start to the year was partly a weather-related blip, with momentum now fading again," Andrew Hunter, deputy chief U.S. economist with Capital Economics, said in a report. "With the sharp fall in job openings and upward trend in jobless claims also pointing to a cooling in labor demand, and the drag from the recent banking turmoil still to feed through, we expect employment growth to slow more sharply soon."
Wage growth slowed, with average hourly earnings rising 4.2% over the past 12 months, down from 4.6% in February.
And more workers came off the sidelines, with the labor participation rate — a measure of workers who are employed or looking for work — edging up to 62.6%.
Since March of 2022, the Fed's chief priority has been to tame the hottest the hottest bout of inflation in four decades leading it to sharply push up the cost of borrowing money. A series of interest rate hikes have slowed down homebuying and led to layoffs in rate-sensitive fields, such as tech and finance. Manufacturing and construction are also weakening, with factory employment staying flat and construction declining by 9,000 jobs.
The March job numbers also show that employment rose in leisure and hospitality, government, health care, and professional and business services. Temporary help services, often a leading indicator of employment in white-collar fields, fell by 10,000.
"The labor market remains very strong, albeit gradually slowing, largely supported by job growth in the services sectors," Olu Sonola, head of U.S. economics at Fitch, said in an email. "It is notable that this report shows outright job losses in the manufacturing and construction sectors. This is a clear signal that the Fed's aggressive rate hiking cycle is now constraining labor demand, particularly in interest rate-sensitive sectors."
As borrowing costs have risen, inflation has steadily eased, with prices increasing 6% over the past year — down from their breakneck pace last summer, but still far higher than the Fed's 2% annual target. The central bank has indicated it plans to hike rates several more times this year.
The Associated Press contributed reporting.