Employment Rebounds in March
The US added a better-than-expected 196,000 jobs and the unemployment rate remained at 3.8 percent
After adding a lackluster 33,000 jobs in February, hiring picked-up in March, with employers adding 196,000 jobs. This better-than-expected job creation should relieve some of the fears over last month’s report that the labor market had dramatically slowed. Along with solid job growth, the unemployment rate in March remained at 3.8 percent, and the underemployment rate at 7.3 percent. Annual wage growth, which has expanded at over 3 percent for the last 6 months, cooled slightly from 3.4 percent in February to 3.2 percent in March.
Top Takeaways from the Report
The labor market remains solid despite slowdown fears
After a very weak February employment report, many economists were concerned that the broadening economic slowdown might be hitting the labor market. While it does appear that the labor market is cooling from its highs of 2018, it remains on solid footing. Employers have added an average of 180,000 jobs per month in the first three months of 2019, down from an average of 228,000 per month in the same time period last year, but above the 173,000 per month created at the start of 2017. As of March, employers have added jobs for 102 consecutive months.
Additionally, the unemployment rate remained at 3.8 percent and the underemployment rate at 7.3 percent. After an uncharacteristically-steep fall from 8.1 percent to 7.3 percent last month, there was some concern that the decline in underemployment was just an anomaly. Now with March’s report validating the number, it is another positive sign that the labor market remains very tight and that people are finding the jobs they are looking for. While unemployment remained level, it did so as labor force participation fell slightly from 63.2 percent to 63.0 percent. The labor force participation rate – which is the ratio of the population 16 and older that is working or looking for work – is an important indicator to watch as it is a gauge of how attractive the labor market is. With the unemployment rate near five-decade lows, employers are going to need to find ways to get more people to remain in and rejoin the labor force.
An ideal report for the Fed and Financial Markets
March’s employment report should validate the Fed’s new policy path and be a positive for financial markets. The Fed’s decision in early 2019 to take a “patient” stance toward interest rate hikes for the remainder of the year appears to be validated by incoming economic data and the lack of wage-induced inflation. For much of 2018 the Fed had been concerned that rapidly rising wages would push up inflation and force more interest rate hikes. However, even as wages have risen, inflation has remained below the Fed’s 2 percent target. Financial markets should like the report as it shows the labor market is still solid and wages are rising at a respectable though not out-of-control pace.
Growth by Select Industry
- The education and health services sector added the largest number of jobs in March at 70,000. Of those 70,000 jobs, 49,100 were in health care.
- The manufacturing sector lost 6,000 jobs in March. This is the first employment decline in the sector since July 2017 and it appears to confirm the broader manufacturing weakness seen worldwide.
- After booming in January and declining in February, the construction sector added 16,000 jobs in March. The sector has added 246,000 jobs over the past 12 months.
The Bottom Line
March’s employment report should dispel fears of a sharp labor market slowdown. With job creation coming in at a better-than-expected 196,000 jobs and the unemployment rate level at 3.8 percent, the labor market is on solid footing.
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