The economy added a respectable 236,000 jobs in March, right in line with economists’ expectations.
This month’s total is notably lower than January’s 472,000 jobs added and February’s 326,000, signaling the labor market cooled somewhat.
For those hoping the Federal Reserve continues to slow – or even stall – the pace of interest rate hikes, March’s report could be good news.
The 236,000 jobs added by employers in March signal that businesses remain confident in adding new positions in addition to backfilling open roles. March’s job gains bring the 2023 total to over 1 million through just the first three months of the year. While job gains have slowed, they remain above the pre-pandemic average of 200,000 jobs added per month.
Job gains for both January and February were revised downward by a total of 17,000, but the labor market remains incredibly tight.
Demand for Workers Starts to Slow
The labor market is among the tightest in history, and the competition for talent remains fierce. Job openings are a key indicator of labor demand. And February’s job openings, reported earlier this week, showed the first signs that companies are letting up in terms of hiring plans.
Job openings decreased by more than 500,000 to 9.9 million, still much higher than the 2015 to 2019 average of 6.4 million monthly job openings.
As demand for workers starts to moderate, we’d expect record wage growth to ease, and March’s jobs report shows 12-month wage growth slowed to 4.2% – the lowest rate since June 2021.
Layoffs Remain Near Historic Lows
Hiring is still strong, and layoffs have not increased at the pace many projected. And while there have been many high-profile layoffs, the number decreased by more than 200,000 to 1.5 million in February, well below the 1.9 million monthly average layoffs before the pandemic.
And the unemployment rate ticked down to 3.5%, matching pre-pandemic lows. With 9.9 million job openings, and fewer than 6 million unemployed workers available to fill those open roles, there are 1.7 open jobs for each unemployed worker.
Our prediction for 2023 is moderation to historic norms, and slower job growth over the past two months could be a sign that the labor market is finally starting to cool.
Companies will need to watch the labor market and track compensation trends closely this year to stay competitive.