US job growth strong in March, unemployment falls to 3.5 percent | Unemployment news
The strong job numbers could prompt the Fed to continue raising interest rates.
The US economy continued to shed jobs at a rapid pace in March, pushing the unemployment rate down to 3.5 percent, signs of continued labor market tightening that could prompt the Federal Reserve to raise interest rates. – again next month.
Nonfarm payrolls increased by 236,000 jobs last month, the Labor Department said in its employment report Friday. Data for February was revised higher to show that 326,000 jobs were added instead of 311,000 as previously reported.
Some of the slowdown in hiring reflected the decline in growth from the unseasonal weather in January and February.
Economists polled by Reuters had forecast 239,000 payrolls. Estimates ranged from 150,000 to 342,000. The economy needs to create about 100,000 jobs per month to keep up with growth in the working-age population.
As with the latest economic data, it was too early for financial market pressure, caused by the failure of two regional banks in March, to show up in the earnings report.
The unemployment rate fell to 3.5 percent from 3.6 percent in February. Average hourly earnings rose 0.3 percent in March after gaining 0.2 percent in February. That reduced the annual increase in wages to 4.2 percent from 4.6 percent in February, which was still too high to be consistent with the Fed’s 2 percent inflation target. Fed officials will now await inflation data later this month to gauge the effectiveness of their year-long monetary policy tightening campaign.
Financial markets were leaning toward the US central bank increasing rates by another 25 basis points at the May 2-3 policy meeting, according to the CME Group’s FedWatch tool.
The Fed last month raised its overnight interest rate by a quarter of a percentage point, but signaled that it was on the verge of halting rate hikes in response to financial market pressure. It has raised its policy rate by 475 basis points since last March from the near-zero level to the current range of 4.75 percent-5.00 percent.
But the job market is losing its luster. The Labor Department’s annual revisions to the weekly claims and continuous claims data released Thursday showed significant upgrades on both series.
Surveys from the Institute for Supply Management this week offered a low assessment of the labor market. Job openings fell below 10 million at the end of February for the first time in nearly two years, although there were 1.7 job openings for every unemployed person that month, government data showed.
The labor market is expected to expand significantly starting in the second quarter as companies deal more with sluggish demand caused by higher borrowing costs.
Credit conditions have also tightened, which may make it more difficult for small businesses and households to access funding. Small businesses, such as restaurants and bars, have been the main drivers of job growth since recovering from the pandemic.
Some economists have expected payrolls to turn negative in the second half of the year, a development they said would prompt the Fed to begin cutting rates to prevent the economy from entering a deep recession. Fed Chairman Jerome Powell has pushed against this assumption.
Economists who have forecast a rate cut this year argued that parts of the economy, such as housing, are already in recession, while tighter lending standards adopted by banks mean that credit to be more limited in the economy.
They also noted that business sentiment was at declining levels, while consumer confidence remained weak. (Reporting by Lucia Mutikani; Editing by Paul Simao and Chizu Nomiyama)