Job growth likely slowed in March as rising interest rates, persistent inflation and growing fears of a recession affected employers’ demand for workers.
The slowdown may represent a step towards normal levels of growth for the US labor market, which has been very tight for more than a year. But it could also confirm that job creation remains remarkably healthy, even as other aspects of the economy show signs of weakness.
Economists expect the US economy to add 240,000 jobs in March, according to consensus forecasts from a FactSet view, reversing February’s 311,000 jobs addition and roughly matching the pace set in December. Economists also expect the unemployment rate to hold steady at 3.6%.
Investors and economists had been expecting to see signs that the economy was beginning to deteriorate since the collapse of Silicon Valley Bank and Signature Bank in early March. While the March jobs report will be closely analyzed for clues about the direction the labor market is headed, it is unlikely to show the impact, if any, of the banking turmoil on workers, given that the full effects are still spilling over into the country. the broader economy.
What the March report will show, economists say, is continued strength in the labor market, with job growth averaging 408,000 jobs per month so far this year. In January, the US economy added more than half a million jobs.
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“Overall, the number is going to look pretty good across the board, because there’s still very little evidence that labor demand has really waned here lately,” Jefferies economist Thomas Simmons says of the March report.
A March jobs report similar to economists’ expectations would be welcome news for the Federal Reserve, which has made clear it needs to see the labor market slow somewhat in order to help officials in their battle to rein in inflation. Strong demand for workers pushed up wages, which pushed up costs for services.
But even a mild slowdown in line with expectations would indicate that the Fed likely has more work to do to further cool the labor market. Federal Reserve Chairman Jerome Powell said the economy needed to create only about 100,000 jobs a month — less than half the March forecast — to keep up with population growth.
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The March report could show a mixed picture on the wages front. Economists expect average hourly earnings to rise 0.3% in March, versus 0.2% in February. But they see the annual pace of wage growth slowing to 4.3% from 4.6% in the previous month. That would represent a much faster rate of growth than the roughly 3.5% pace that many economists believe would be in line with the federal inflation target of 2%.
Despite the optimistic outlook, there is reason to expect March data to be weaker as the flexible labor market finally begins to cool off.
Data released earlier this week for February showed that job vacancies fell more than expected and fell below 10 million for the first time since May 2021. This indicates that demand for workers is waning, although it remains at a historically high level, and has declined. Layoffs more than a month.
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Manufacturing data released this week showed employment contracted. Unemployment claims data has been revised up significantly due to the change in seasonal accounts. The revision “makes it clear that the US labor market has been weakening since the beginning of February of this year,” says Eugenio Aleman, chief economist at Raymond James.
Recent warning signs have led some economists to concede that the risk to their outlook is weighted to the downside, meaning that job growth is more likely to come in below expectations than above.
Wells Fargo, for example, revised its forecast twice downward this week, from 240,000 in the beginning to 190,000 now. The changes reflect cooler-than-expected ISM data and revised jobless claims data, says Jay Bryson, the company’s chief economist.
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However, there is also reason to believe that the labor market could prove stronger than expected: job growth has come in above economists’ expectations in each of the past 11 months.
The Labor Department will release March data at 8:30 a.m. ET
Write to Megan Cassella at [email protected]
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