WASHINGTON (AP) — U.S. employers added as many as 236,000 jobs in March, suggesting the economy remains on solid footing despite nine interest rate hikes by the Federal Reserve over the past year in its efforts to control inflation .
The unemployment rate fell to 3.5 percent, slightly above the 53-year low of 3.4 percent set in January.
At the same time, some details in Friday’s Labor Department report highlighted the possibility that inflationary pressures are easing and that the Fed may soon decide to hold off on rate hikes. Average hourly wages in March rose 4.2% from 12 months earlier, down sharply from February’s 4.6% year-over-year increase. However, on a month-over-month basis, wages rose 0.3% from February to March, compared with a slight increase of 0.2% from January to February.
In another sign that could reassure the Fed’s inflation fighters, 480,000 Americans started looking for work in March. Typically, the greater the supply of job seekers, the less pressure employers feel to raise wages. The result is often an easing of inflationary pressures.
In its report on Friday, the government also revised down its estimate of job growth in January and February to a total of 17,000.
“The labor market continues to weaken,” said Sinem Buber, an economist at employment firm ZipRecruiter. “This should reduce inflationary pressures in the coming months and give the Federal Reserve more confidence in the outlook for inflation.”
Sectors of the economy that gained jobs in March included restaurants and bars, health care workers and government agencies.
Despite last month’s healthy job growth, the latest economic signs suggest the economy may be slowing, which would help cool inflationary pressures. Production weakens. America’s trade with the rest of the world is declining. And while restaurants, retailers and other service businesses are still growing, they’re doing so at a slower pace.
For Fed officials, taming inflation is the first order of business. They were slow to respond after consumer prices began to rise in the spring of 2021, concluding that this was only a temporary consequence of supply bottlenecks caused by the economy’s surprisingly explosive recovery from the pandemic recession.
It wasn’t until March 2022 that the Fed began raising its key rate from near zero. In the past year, however, it has raised interest rates more aggressively than it did in the 1980s to attack the worst inflation crisis since then.
And as borrowing costs rose, inflation steadily fell. The most recent annual rate of consumer inflation – 6% – is well below the 9.1% rate reached last June. But it’s still well above the Fed’s 2% target.
Complicating matters is the turmoil in the financial system. Two major US banks collapsed in March, and higher rates and tighter lending conditions could further destabilize banks and reduce lending and consumer and business spending.
The Fed aims to achieve a so-called soft landing, slowing growth just enough to tame inflation without sending the world’s largest economy into recession. Most economists doubt it will work; a recession is expected by the end of the year.
So far, the economy has proven resilient to rising borrowing costs. US gross domestic product – the economy’s total output of goods and services – grew at a brisk pace in the second half of 2022. However, recent data suggest the economy is losing steam.
The Institute for Supply Management, an association of purchasing managers, reported on Monday that US manufacturing activity contracted in March for the fifth consecutive month. Two days later, the ISM said growth in services, which make up the vast majority of the US workforce, slowed sharply last month.
The Commerce Department reported Wednesday that both U.S. exports and imports fell in February, another sign that the global economy is weakening.
The Labor Department said Thursday it has changed the way it calculates the number of Americans applying for unemployment benefits. The change added nearly 100,000 claims to the figures from the past two weeks and could explain why this year’s heavy layoffs in the tech sector have not yet appeared on the jobless rolls.
The Labor Department also reported this week that employers posted 9.9 million job vacancies in February, the lowest since May 2021 but still well above anything seen before 2021.
Seeking a soft landing, the Fed expressed hope that employers would ease wage pressures by posting fewer job vacancies rather than cutting many existing jobs. The Fed also hopes that more Americans will start looking for work, increasing the supply of jobs and reducing pressure on employers to raise wages.
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