Gregory Heym is Chief Economist at Brown Harris Stevens. His weekly series, The Line, covers new developments to the economy, including trends and forecasts. Read on for the latest report and subscribe here to receive The Line in your inbox.
Today, we have the latest on the labor market. Spoiler alert: it's still on fire.
Job Growth Surges in March
That headline says it all. The 303,000 jobs added last month easily beat the 200,000 Dow Jones forecast. Here’s the other highlights of the March jobs report:
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The unemployment rate fell to 3.8%.
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Wages rose 0.3% and are 4.1% higher than a year ago.
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The labor force participation rate—the percentage of working-age people working or looking for work—rose to 62.7%.
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Job growth in January and February was revised up by 22,000.
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The average workweek ticked up to 34.4 hours.
Add this all up, and you have to conclude that the labor market seems to be strengthening not weakening. March’s employment gain was the highest since May 2022, and the rise in the workweek combined with higher hourly wages means more money in workers’ pockets.
Perhaps the biggest thing in the report was the increase in the labor force participation rate. We’ve been saying for a few years now that we need more people to reenter the workforce to fill the millions on available jobs out there. Actually, the number as of the end of February was 8.8 million available jobs.
If the participation rate keeps going up, companies can fill jobs without having to offer higher wages. That means we can have strong job growth that doesn’t push wages higher, and therefore doesn’t stoke inflation.
Unfortunately, while great news for workers and those looking for work, this is not great news for interest rates. The Fed will look at this report as further evidence that rate cuts aren’t needed right now. Remember, they may have said at their last meeting they expected three rate cuts this year, but data like this can easily reduce that number.
To sum up:
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Hiring is pickup up.
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The unemployment rate remains very low.
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Jobless claims remain very low.
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Wage growth is slowing a bit, but still outpacing price growth.
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People are coming back to the labor force.
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Companies have 8.8 million jobs to fill.
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Expect a lot of hiring in the coming months.
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Also expect a further uptick in mortgage rates.