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March Job Report shows a resilient Labor Market

The U.S. Department of Labor released job report today and the data show job growth totals 236,000 for nonfarm payrolls. This number was above expectations, which is rather surprising since hiring began to slow down. The expectation number was 230,000. Indeed, the number of job creations in March was slightly lower than that in February, in which 326,000 were added. The unemployment rate ticked lower to 3.5%, against expectations that it would hold at 3.6%, with the decrease coming as labor force participation increased to its highest level since before COVID-19

Source: U.S. Bureau of Labor Statistics

Between January 2022 and March 2023, job creation peaked at more than 800,000 jobs in February 2022. This was also prior to the interest rate hikes. What is interesting to see is that despite the incrementation in interest rates throughout 2022 and in the first quarter of 2023, monthly job creation never dropped below 200,000. The job gain may be bad news for the Federal Reserve because it expected unemployment to increase in order to cool off inflation. But the 236,000 jobs created clearly show that the labor market is more resilient than ever. As a matter of fact, the March job gain may lead the Fed to conclude that the pace of hiring is still putting upward pressure on wages and inflation and that further rate hikes will be necessary. A tight credit market leads to higher rates on mortgages, auto loans, credit card borrowing, and many business loans.

Source: U.S. Bureau of Labor Statistics

Along with the payroll gains came a 0.3% increase in average hourly earnings, pushing the 12-month increase to 4.2%, the lowest since June 2021. The data show that leisure and hospitality led sectors with growth of 72,000 jobs, below the 95,000 paces of the past six months. Government (47,000), professional and business services (39,000), and healthcare (34,000) also posted solid increases. Retail is the only main sector that incurred major job losses. The main question then is to ask ourselves why is the job market still resilient despite high-interest rates? Although layoffs are picking up in some parts of the economy; robust job gains, and persistently elevated wages have continued to increase. There were about 1.7 job openings per unemployed worker, the lowest ratio since November 2021 but the number of open jobs is still significantly above its pre-pandemic level. Prior to 2021, job openings had never before reached 8 million. And even though the job openings are declining, the decline isn’t impactful since job openings for March 2023 were 10 million. Economic resiliency, especially in the job market, is making it challenging to determine whether aggressive rate hikes will push the economy into a recession.


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