The numbers: The U.S. created a robust 431,000 jobs in March and the unemployment rate took another step toward a half-century low, as companies pushed to add staff and more people entered the labor force in search of work.
Economists polled by The Wall Street Journal had forecast 490,000 new jobs, but the shortfall was made up for by stronger than previously reported hiring in the first two months of the year.
The unemployment rate, meanwhile, slid to 3.6% from 3.8%, the government said Friday.
Just before the pandemic, the jobless rate had sunk to a 50-year low of 3.5%.
The healthy March employment report underscores why the Federal Reserve is moving to jack up a key short-term U.S. interest rate this year after keeping it near zero during the pandemic.
The rate of inflation has soared to a 40-year high of almost 8% and surging wages are now adding to the price pressures.
Hourly pay rose sharply again in March and pushed the increase in the past 12 months to 5.6%, the highest rate since the early 1980s.
One caveat: The jobs report has also been less reliable over the past year owing to the waxing and waning of the pandemic. The estimates have been subject to large revisions months later.
By any measure the labor market is tight. Job openings are at record highs, layoffs are at record lows and most businesses want to hire
Stocks fell after the jobs report. Treasury yields remained slightly higher, with the 10-year rate above 2.36%.
Big picture: The roaring jobs market is the economy’s lifeline in a time of rising inflation and the global fallout from the Russian invasion of Ukraine.
So long as most Americans have a job and feel secure in their job, economists say, the U.S. is likely to keep growing at a steady pace. Consumer spending is by far the biggest driver of the economy and people are still spending plenty of money.
The water is getting choppier, however.
Rising interest rates could slow sales of homes, autos and other big-ticket items and reduce business investment. The Ukraine conflict and Covid lockdowns in China could also add to upward pressure on prices.
Key details: For the second month in a row, a quarter of the job gains occurred at service-oriented companies such as hotels, restaurants and other businesses that rely on large crowds and deal directly with customers.
Employment rose by 112,000 last month in the hospitality business. These businesses saw a pickup in sales after omicron faded and people went out more.
Employment also rose by 102,000 at professional businesses, 49,000 in retail, 38,000 in manufacturing and 19,000 in construction.
The size of the labor force grew by 418,000 in March, extending a recent trend in which several million people have either found jobs or began looking for work again.
The percentage of people in the labor force edged up to a new pandemic high of 62.4% from 62.3%, though it’s still about a point below the pre-pandemic peak.
The economy would have about 1.4 million more workers if the so-called participation rate in the labor market was the same now as it was before the pandemic.
At the current rate of hiring, employment in the U.S. is on track to exceed pre-pandemic levels by early summer.
Hiring in February and January was somewhat stronger than previously reported. Job gains in the two months were raised by a combined 95,000.
Millions of workers have taken advantage of the tight labor market by switching jobs, usually for higher pay or benefits or more flexibility. Some have left service-oriented jobs that require lots of face-to-face contact with customers.
Over the past year the average paycheck has increased by 5.6% — one of the fastest increases since the early 1980s.
“Demand for labor is very strong, and with the labor force smaller than it was before the pandemic, firms are competing for workers and bidding up wages,” said senior economic advisor Stuart Hoffman of PNC Financial Services.
Fatter paychecks don’t look quite as good when factoring high inflation. The cost of living jumped 7.9% in the 12 months ended in February.
Economists are watching closely to see if rising wages start to add significantly to inflationary pressures. The last time a so-called wage-price spiral took place was in the 1970s and early 1980s, when the U.S. experienced one of the worst bouts of inflation in its history.
Looking ahead: “The labor market continues to power ahead, despite significant headwinds looming,” said Nick Bunker, economic research director of Indeed.
“The March jobs report shows employment remains the best part of the economy, especially for lower-wage workers,” said Robert Frick, corporate economist at Navy Federal Credit Union. “These show an economy accelerating as the pandemic diminishes, and job levels probably reaching pre-pandemic levels this summer.”