March jobs show growth is falling back to normal, and unemployment even lower

March’s jobs report seems to indicate that maybe we are finally settling back to earth after 2 years of unprecedented growth.

US employers added just 236,000 jobs in March, coming in below expectations and indicating that the labor market is cooling off amid the Federal Reserve’s yearlong rate-hiking campaign to chill inflation.

The unemploymeant rate dropped to 3.5%, according to the March jobs report released Friday by the Bureau of Labor Statistics.

Economists were expecting a net gain of 239,000 jobs for the month and a jobless rate of 3.6%, according to Refinitiv. This is the first jobs report in 12 months that came in below expectations.

But it also was the lowest month with a gain in jobs since the end of 2019, and private sector employment only rose by 189,000. You can see that the Biden Jobs Boom has started to settle down over the last year, and slowed further since September.

Still a good number, but noticeably different from what we doing in the first 12 months after the stimulus was signed in March 2021.

There was a more positive side of the report, which came in the household survey.

In February, the labor force participation rate for workers between the ages of 25 and 54 hit 83.2%, surpassing pre-pandemic levels. And last month, the overall labor force participation rate continued its upward march, increasing to 62.6% and matching a pandemic-era high. But that’s still below the February 2020 rate of 63.3%.

Even though labor force participation increased, the unemployment rate ticked down by 0.1 percentage points to 3.5%. That’s largely attributable to the strength in employment, according to Eugenio Aleman, Raymond James’ chief economist.

The share of the U.S. population ages 25-54 that had a job in March 2023 was the highest since 2001

It took almost 13 years (Jan '07 to Dec '19) for this ratio to exceed its cyclical peak after the 07-09 recession.

It took just 3 years for this current cycle pic.twitter.com/IRyn4X002J

— Nick Timiraos (@NickTimiraos) April 7, 2023

Keep that one in mind when you hear Republicans insisting there are a large number of people not wanting to work and sitting on the sidelines. Not true among those who are too young to retire.

Let’s also dig into the actual report from the Bureau of Labor Statistics to look at wage growth and how certain sectors fared.

On the inflation front, wage growth was relatively small, and I’ll also note that the work week shrunk by a fraction.

In March, average hourly earnings for all employees on private nonfarm payrolls rose by 9 cents, or 0.3 percent, to $33.18. Over the past 12 months, average hourly earnings have increased by 4.2 percent. In March, average hourly earnings of private-sector production and nonsupervisory employees rose by 9 cents, or 0.3 percent, to $28.50.

The average workweek for all employees on private nonfarm payrolls edged down by 0.1 hour to 34.4 hours in March. In manufacturing, the average workweek was unchanged at 40.3 hours, and overtime remained at 3.0 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was unchanged at 33.9 hours.

4.2% hourly wage growth over the last year isn’t any kind of inflationary threat. Especially since the average work week has gone down by 0.3 hours in that time, meaning the average weekly wage is only up 3.3% for the last 12 months.

There was also a clear divergence in goods vs services hiring for March, with the largest growth being in two sectors that are still not back to pre-COVID levels, while job growth in sectors such as manufacturing, construction, and IT has stagnated after big gains earlier.

Leisure and hospitality added 72,000 jobs in March, lower than the average monthly gain of 95,000 over the prior 6 months. Most of the job growth occurred in food services and drinking places, where employment rose by 50,000 in March. Employment in leisure and hospitality is below its pre-pandemic February 2020 level by 368,000, or 2.2 percent.

Government employment increased by 47,000 in March, the same as the average monthly gain over the prior 6 months. Overall, employment in government is below its February 2020 level by 314,000, or 1.4 percent....

Employment showed little change over the month in other major industries, including mining, quarrying, and oil and gas extraction; construction; manufacturing; wholesale trade; information; financial activities; and other services.

Jobs in construction and manufacturing have plateaud in recent months, as rate hikes have continued.

So with wages starting to be held in check and job growth good-but-slowing, why would the Fed want to keep hiking past the 5% it is already at? Well, unless it thinks 3.5% unemployment with a rising workforce participation rate is somehow a bad thing.

Oh wait, given how disconnected these guys are from everyday life, and how they are more concerned with a magic 2% figure on inflation instead of accepting inflation that's still less than income growth in a strong economy, I guess it’s possible they do think that. Especially a Republican like Jerome Powell. Can't have things be too good for Biden ahead of 2024, you know.