In March, US hiring decelerated as the formerly robust job market began to weaken due to high interest rates and persistent inflation.
According to the monthly payroll report released by the Labor Department on Friday, employers added 236,000 jobs in March, which is close to the 239,000 job prediction made by Refinitiv economists.
The unemployment rate dropped slightly to 3.5%, while the labor force participation rate rose to its highest level since before the pandemic. This represents the smallest monthly increase in employment since December 2020.
We just got a mixed job report
Hiring slowed, as the economy added 236,000 jobs in March, fewer than in February
But the unemployment rate actually decreased to 3.5%
Conclusion: This doesn't change much for the Fed
— Genevieve Roch-Decter, CFA (@GRDecter) April 7, 2023
Although monthly employment figures are always significant, the Federal Reserve is paying close attention to this specific report for indications that the job market is beginning to soften as policymakers endeavor to control inflation via a sequence of interest rate hikes.
The March jobs report was not affected by the recent financial crisis involving three tech-based banks. While the possibility of future repercussions cannot be ruled out, the financial sector’s worst apprehensions seem to have been avoided for now.
The bank collapses led financial experts and Wall Street executives to speculate, or perhaps wish, that the Federal Reserve would halt its interest rate hikes. However, the Fed only decreased the hike by 25 basis points.
There are indications that the Federal Reserve’s assertive policies aimed at curbing inflation are affecting employment, which is precisely what the Fed is aiming for. The Wall Street Journal observes that several indicators beyond the labor report suggest that employers are scaling back their recruitment efforts.
The significant increase in wages has played a part in the surge of inflation over the last few years, as some employers have increased prices to offset the rise in labor costs. Despite wage growth remaining higher than pre-pandemic levels, it has decreased in recent months, which is in line with the Federal Reserve’s objective of reducing inflation.
Advertisements offering signing bonuses on Indeed.com are becoming less prevalent in lower-wage industries, presumably due to a reduction in labor shortages as more individuals seek employment.
Despite this, the job market remains competitive, with the national unemployment rate continuing to hover close to its lowest level in fifty years.
The Wall Street Journal reported that “small businesses and consumers may face increased difficulty in obtaining loans, which may lead to job cuts eventually. Additionally, workers may be less inclined to seek out new job opportunities.” Therefore, there may be some consequences across the United States as the job market slows down, but presently there are few indications of any imminent developments.
Nevertheless, concerns about a potential recession persist, as signs of economic turmoil in the coming months remain present in the back of everyone’s minds.