Weather dampens March jobs
The pace of wage growth is nearer 4% than the Fed’s target of 2% inflation.
Payroll employment rose by 236,000 in March after a small, net downward revision to the two prior months. That is the weakest gain since December 2020, when payrolls actually declined for the month, or the second weakest since the economy reopened.
Public sector payrolls increased by 47,000, driven by strong gains in state and local government employment. Gains were across the board from education to infrastructure investments. That represents a catch-up from losses during the pandemic. State and local employment is still 362,000 jobs below February 2020 levels.
Private payrolls increased by 189,000 in March. The most recent Job Openings and Labor Turnover survey revealed that businesses with less than 250 employees accounted for a record 71.4% of job openings. Those firms have helped to absorb high-profile layoffs at larger firms but are among the most vulnerable to the credit tightening now in the pipeline.
Job gains overall were driven by leisure and hospitality and health and social assistance. Many employers in those sectors are still attempting to gain ground lost due to the recession. Leisure and hospitality are still 368,000 jobs below February 2020 levels. Nursing homes are still 262,000 below February 2020 levels.
Hiring of childcare workers increased in March. That helped to significantly reduce the record ranks of those unable to work due to childcare problems last month. The number of those out on parental leave also fell from record levels in February.
Professional and business services were next, with an increase of 39,000. Temporary hires, which are easier to cut, fell by 11,000. Gains were broad-based. Warehousing lost ground during the month. Retail shed jobs as well, except for department stores.
Hiring by firms with less than 250 workers continues to drive gains in the private sector.
Manufacturing employment edged slightly lower, with gains in the vehicle sector offsetting losses elsewhere. Construction fell for the first time since January 2022. Harsh spring weather and weakness in the housing sector accounted for those losses. The remodeling of commercial space also appears to have abated.
Severed workers show up as employed for as long as they receive paychecks. They cannot apply for unemployment insurance until those payments end. That means much of the weakness associated with earlier layoffs is still ahead of us.
Average hourly earnings rose 0.3% in March, up slightly from the 0.2% pace in February. Leisure and hospitality drove the acceleration on a month-to-month basis. Year-over-year gains slowed to 4.2% after accelerating sharply a year ago. That pace is still consistent with inflation in the 3.5% to 4% range, well above the Federal Reserve’s target of 2%. Weekly hours worked fell again, continuing a trend we have seen since the start of the year.
Separately, the unemployment rate edged back down to 3.5% in March from 3.6% in February. That matched the pace of February 2020. The participation rate reached 62.6%, the highest level since March 2020, but still well below the 63.3% rate of February 2020. The loss in participation has been concentrated among older workers. The participation rate of prime-age workers (25-54 years old) hit 83.1%, slightly above the level in February 2020. The unemployment rate for Black workers is 5%, the lowest on record.
The labor force has grown by 2.3 million since February 2020, or 1.4%. That is roughly one-third the pace of labor force growth we saw in the 2010s. The breakdown between the foreign-born and native-born workers, which is not seasonally adjusted, shows that foreign-born workers make up more than 80% of those gains.
Those out and unable to work due to vacation reached 2.9 million in March, another monthly record. Work by ADP suggests that workers at all wage levels are taking more time off than they have in the past to travel and see relatives.
Multiple job holders rose to eight million in March from 7.9 million in February. That matches the levels we saw in February 2020. The 12-month rolling average for those with two full-time jobs rose to 384,000 in March, close to the record high of 387,000 in February. That is 20% above the peak in late 2000.
Bottom Line:
The labor market posted solid if not spectacular gains. Hiring in both the public and the private sectors slowed. Hiring by firms with less than 250 workers continues to drive gains in the private sector. Those firms are the most vulnerable to the recent tightening of credit conditions.
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