United States: Employment growth hits the brakes in March
April 6, 2018
Non-farm payrolls took a breather in March following outsized gains in February. U.S. payrolls rose 103,000 in March, well below both market expectations of 175,000 new jobs and the upwardly revised 326,000 jobs created in February (previously reported: +313,000). The figure was also the weakest since the September hurricanes and largely reflected weather effects. Despite March’s lackluster performance and a downward revision of 63,000 jobs to January’s figure, hiring still averaged a healthy 202,000 jobs per month in the first quarter. This was the best performance since the third quarter of 2016.
In March, employment moderated across most weather-sensitive industries as warm weather in February was followed by unseasonably severe conditions in early March. Construction employment declined 15,000 in March—the first month jobs have been lost in the sector since mid-2017—after increasing 65,000 in the previous month. The retail sector also lost 4,400 workers in March after adding 47,300 in February. Conversely, leading the pack in job creation in March were manufacturing (+22,000 jobs), business services (+33,000 jobs), and education and healthcare (+25,000 jobs).
The unemployment rate held steady at a 17-year low of 4.1% for the sixth consecutive month in March, disappointing market analysts who had expected the rate to dip to 4.0%. The steady jobless rate was largely the result of employment growth being offset by workers re-entering the labor market. The labor participation rate eased a tenth of a percentage point, to 62.9%, which followed a particularly strong 0.3 percentage-point gain in February. Tight labor conditions continued to fuel wage inflation, which picked up marginally to 2.7% in March. In month-on-month terms, average hourly earnings were up 0.3% in March, in line with market estimates and above February’s 0.1% increase.
All told, signals were mixed in the March jobs report. Employment growth was well below expectations and likely turned down concerns over wages, which nonetheless accelerated tangibly in March. Smoothing the hiring trend, the pace of jobs gains remains upbeat and should eventually cause the unemployment rate to dip below 4.0%, an effect that will be compounded by the government’s double dose of fiscal stimulus that is projected to soon hit the economy. Against this backdrop, and with wage growth dynamics firmly looking upwards, the Federal Reserve is widely expected to hike its main interest rate again at its June meeting, after delivering a first increase in March.
Author: David Ampudia, Economist