The U.S. economy showed signs of slowing the pace of job growth in March, adding the fewest number of jobs in the past 12 months.
The question is whether that is a slower enough pace to satisfy the Federal Reserve Board, which continues to work to bring inflation down to its goal of a 2% annual rate.
According to the employment report released Friday by the U.S. Bureau of Labor Statistics (BLS), total nonfarm payroll employment rose by 236,000 in March, still a significant gain but below the upwardly revised 326,000 jobs added in February and the downwardly revised 472,00 added in January. The estimated total for March was also slightly below analysts expectations of 239,000 jobs.
The estimate is the smallest in the past 12 months, after the BLS revised December’s increase upward to 260,000 from its initial estimate of 223,000.
March’s unemployment rate slipped back to 3.5%, while the number of unemployed dipped to 5.8 million. Both had increased in February, but the rates have shown little net movement since early 2022, BLS said. The labor force participation rate, at 62.6%, continued to trend up in March.
The leisure and hospitality sector led the way, adding 72,000 jobs in March, lower than the average monthly gain of 95,000 over the previous six months. Despite that growth, employment in leisure and hospitality remains below its pre-pandemic February 2020 level by 368,000, or 2.2%.
Other sectors reporting big gains were government (+47,000), professional and business services (+39,000), and health care (+34,000).
Employment showed little change over the month in other major industries, including construction and financial activities.
Wages also continued their upward trend In March, with average hourly earnings for all employees on private nonfarm payrolls rising by 9 cents, or 0.3%, to $33.18. Over the past 12 months, average hourly earnings have increased by 4.2%.
The Federal Open Market Committee is scheduled to meet again on May 2-3. Following its March 21-22 meeting, Federal Reserve Chairman Jerome Powell announced a 25-basis-point increase in the federal funds rate, the ninth consecutive increase since the FOMC began raising the rate in March 2022.
At the time, he noted the labor market remains “extremely tight,” and that the FOMC would closely monitor the labor market and other economic indicators to determine whether further increases in the benchmark federal funds rate are necessary.
Mike Fratantoni, senior vice president and chief economist for the Mortgage Bankers Association, said it's still possible the Fed could boost the rate again.
“Slowing wage growth should allow inflation in the services to slow over time," he said. "MBA expects that the Federal Reserve has reached the peak for this rate cycle, and slowing job growth supports that call, but the most important data points will be those for inflation. If inflation does not show signs of also slowing, the Fed may move ahead with one last rate hike.”
