For all intents and purposes — and by most economists’ predictions — job growth was supposed to slow by now, as the pandemic recovery grew complete. The US labor market also was supposed to weaken under the pressure of 11 interest rate hikes.
Instead, on Friday, yet another jobs report defied expectations.
Employers added 303,000 jobs in March, the Bureau of Labor Statistics reported. The unemployment rate fell to 3.8% from 3.9% the month before.
Friday’s jobs report not only highlights the US labor market’s remarkable resilience in the face of high interest rates and elevated inflation, but also shows that amid this enduring strength, inflation pressures are easing.
Annual wage gains slowed to 4.1% from 4.3%, a trajectory likely welcomed by the Federal Reserve in its efforts to tame inflation but yet a still-strong rate to help Americans recapture earnings that were decimated by the pandemic and high inflation.
“Today’s jobs report raises the possibility that rather than slowing down, job growth might be holding steady,” Nick Bunker, Indeed Hiring Lab’s economic research director for North America, said in a statement. “But this strength is coming from sources that are more sustainable than those that fueled the burst of gains in 2021. March’s jobs numbers were uniformly strong, and upticks in the employment-population ratio and labor force participation in particular suggest that demand for workers is not outstripping supply, like it was a few years back.”
Historic gains
The total far surpassed economists’ forecasts for 205,000 jobs gained, according to FactSet consensus estimates. The jobless rate was projected to fall from 3.9% to 3.8%.
Last month’s job growth was driven by industries such as health care (+72,300 jobs); government (+71,000 jobs); leisure and hospitality (+49,000 jobs); and construction (+39,000 jobs).
The current US labor market also is one of the strongest, historically: The economy has added jobs for 39 consecutive months, marking the fifth-longest period of job expansion on record, BLS data shows. The unemployment rate has been below 4% for 26 months in a row, the longest streak since the late 1960s.
President Joe Biden touted March’s jobs report Friday.
“Today’s report marks a milestone in America’s comeback,” Biden said in a statement released by the White House Friday morning. “Three years ago, I inherited an economy on the brink. With today’s report of 303,000 new jobs in March, we have passed the milestone of 15 million jobs created since I took office. That’s 15 million more people who have the dignity and respect that comes with a paycheck.”
The economy remains a critical issue for the president as he seeks reelection. In his State of the Union address, the president vowed to raise taxes on corporations and lower everyday costs, including junk fees and prescription drug prices.
March’s jobs report also marked a significant milestone in the pandemic recovery: The leisure and hospitality industry — decimated by lockdowns and subsequent shifts in where people lived and worked and how they spent — reached its pre-pandemic employment levels.
A ‘less noisy’ report
The March jobs report was expected to be the first “less noisy” report of 2024, and a good gauge of underlying labor market dynamics, Greg Daco, chief economist at EY-Parthenon, told CNN Business on Thursday.
“The first two reports were quite noisy, affected by weather, affected by seasonal factors,” he said of the reports for January and February. “We saw wild swings in the underlying data. We saw wild revisions as well.”
The initial monthly estimates are revised twice more as fuller data becomes available. Last month, the whopping gains initially recorded for December and January were revised down by a combined 167,000 jobs.
“That’s a full month of jobs that disappeared, following the revision,” Daco said.
This time around, the revisions were more muted: January’s net gain was revised up by 27,000 to 256,000 jobs, and February’s total was revised down by 5,000 to 270,000.
The immigration factor
Through the first three months of the year, the US labor market is growing at a monthly pace of 276,333 jobs, BLS data shows. In 2023, the monthly gain averaged out at just over 251,000.
The 303,000 net jobs added “is on the higher end of what we’ve been seeing lately, but not out of whack,” Erica Groshen, a former BLS commissioner who now serves as senior economics adviser at Cornell University, told CNN.
The continued gains resurface a longstanding question in this period of expansion: How much job growth is sustainable?
“Thanks to stronger immigration flows, the economy’s capacity has been increased,” Daco said.
Prior to the pandemic, it was estimated that monthly job gains between 60,000 and 100,000 positions would be needed to keep up with population growth (as well as increased retirements). However, recent research estimates that sustainable range could be significantly higher.
A recent report from the Brookings Institution estimated sustainable employment growth to be between 160,000 and 200,000 jobs, citing higher immigration projections from the Congressional Budget Office.
“[Net immigration growth] is adding to the pool of American workers, and those immigrants are bringing some productivity gains with them in technological innovation and refinements,” Brett House, economist and professional practice professor at the Columbia Business School, told CNN. “That’s an important piece of data in an election year, when immigration is under a lot of scrutiny … The United States unambiguously is benefiting from an increase in net immigration.”
What this means for the Fed
A hotter-than-anticipated jobs report, combined with a recent batch of bumpy inflation data, could further complicate the Federal Reserve’s fight to rein in fast-rising prices, including potentially delaying rate cuts, Daco said.
But important elements that factor in to those calculations go beyond the headline job creation numbers, he said, adding that the Fed also will be closely looking at data such as the pace of wage growth (considered an inflation pressure) and hours worked (a measure of labor demand).
In March, average hourly earnings increased 0.3% from February and slowed to 4.1% annually. The average work week ticked higher, to 34.4 hours, and the labor force participation rate grew to 62.7%, up from 62.5%.
In a way, the report was a mixed bag for the Fed: Labor market strength continues to be greater than most forecasts would have anticipated at this point, but hiring is increasing as wage growth is moderating, House said.
“For the Fed, it has all the time in the world to wait,” House said. “The big mistake here is if it goes too soon.”
The Fed will get critical pieces of data next week, when the latest Consumer Price Index and Producer Price Index reports shine light on the trajectory of inflation at the retail and wholesale levels, respectively.
To start the year, the inflation readings have been a little choppy as costlier and still-high housing costs have kept prices rising more than expected. However, the data has shown that underlying inflation (stripping out volatile components like energy and food) has slowed slightly.
Still, while all eyes are on the Fed and speculation swirls as to when the central bank will loosen monetary policy, the discussions should actually be moving from the stock market to the kitchen table, House said.
“There’s a real need to start shifting the focus away from, ‘When will the Fed cut?’ to ‘How strong the economy is doing,’ and how much greater wellbeing that’s bringing to American workers,” he said.
CNN’s Samantha Waldenberg contributed to this report.
