U.S. Added 236,000 Jobs in March, Underscoring Brisk Labor Market

U.S. employers added jobs at a healthy pace last month while unemployment fell to a historic low, cementing the labor market as a bright spot in an economy gradually starting to cool from the Federal Reserve’s campaign to tame inflation by raising interest rates.

Some 236,000 jobs were added in March, the Bureau of Labor Statistics (BLS) reported Friday, in line with estimates of 240,000. Total payrolls rose to 155.6 million, compared with 152.4 million just before the pandemic. Almost 4.2 million jobs have been added since the Fed began hiking rates a year ago.

The unemployment rate fell to 3.5%, a half-century low. The labor force participation rate, which tracks the percentage of the working-age population either employed or looking for work, edged up to 62.6%, the highest of the pandemic recovery. At 60.4%, the employment-to-population ratio is now at its highest since February of 2020.

"Job growth will slow, but remain resilient," Danial Zhao, lead economist at company rating firm Glassdoor, said prior to the report. Even so, a recession could bring swift changes, and recent strains to the banking system would bring "pain for small and mid-sized businesses and their ability to hire."

Today’s jobs report presents a quandary for Fed officials. While annual wage growth has slowed, keeping a lid on inflation, the labor market remains surprisingly tight with unemployment at a half-century low. As a result, Fed officials are likely to prioritize a more aggressive monetary policy stance in the months ahead. Fed funds futures tracked by CME Group now show a 70% probability of a 25 basis point hike at the next FOMC meeting in May, resulting in a federal funds rate between 5% and 5.25%.

Average hourly earnings for private sector workers rose 0.3% to $33.18, after gaining 0.2% in February. Year-over-year, they rose 4.2%, easing from 4.6% in February and marking the slowest annual gain since June of 2021. Slower wage growth helps keep inflation under control, suggesting higher rates are having the Fed’s intended effect.

U.S. stock futures erased losses while bond yields rose as traders welcomed data suggesting a resilient economy. In abbreviated holiday trading sessions, S&P 500 futures were slightly in the green and the yield on 10-year Treasury notes rose to 3.35%.

Gains by Sector

Gains were again led by the leisure and hospitality sector, which added 72,000 positions, driven by a gain of 50,000 at food services and drinking places. That was still below the average monthly gain of 95,000 over the past six months. Employment in the sector is still 2.2% below its pre-pandemic level.

Government employment rose by 47,000, in line with its average monthly gain over the trailing six months. Professional and business services added 39,000 jobs, led by a gain of 26,000 in professional, scientific, and technical services. Health care added 34,000 positions, led by home health care services (+15,000), hospitals (+11,000), and residential care facilities (+8,000).

Other sectors recording slight gains included social assistance (+17,000) and transportation and warehousing (+10,000). Mining, quarrying, and oil and gas extraction; construction, manufacturing, wholesale trade, information, and financial activities recorded little change from February. Retail trade shed 15,000 jobs, led by declines at home furnishings, electronics, and appliance retailers (-9,000).