Economy added solid 196,000 jobs in March, unemployment stays at 3.8%

Hiring rebounded strongly in March as employers added 196,000 jobs, easing fears that payroll growth is slowing sharply amid a cooling economy.

The unemployment rate was unchanged at 3.8%, the Labor Department said Friday.

Economists surveyed by Bloomberg had estimated 175,000 jobs were added last month.

Job gains for January and February were revised up by a modest 14,000.

After severe, weather-related swings in employment early this year, economists largely anticipated a return to normalcy in March. If anything, Goldman Sachs reckoned below-average snowfall would bolster job gains by about 20,000.

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Payroll growth was feeble in February, with just 33,000 additions, but that was largely blamed on weather as construction and leisure and hospitality had especially poor performances. Unusually mild temperatures pulled forward hiring to January, inflating that month’s employment gains. An offsetting drop the following month was compounded by snowstorms.

Yet, the February showing was so paltry it raised concerns that hiring was tapering off more than anticipated as the benefits of federal tax cuts and spending increases fade and the low unemployment rate makes it harder for employers to find workers. The global economy, particularly Europe and China, also has been sputtering, hurting manufacturers.

Economists eagerly awaited the March jobs report to help determine whether the February totals reflected a blip or the start of a steeper downshift in hiring and the economy.

Employers added a robust average of 223,000 jobs a month in 2018, but analysts expect employment growth to throttle back this year amid the slowing economy and worker shortages. Many predict average monthly gains of about 165,000. In the first quarter, the average was 180,000.

"The gradual slowdown in trend employment growth is another sign that the economy is weakening," economist Paul Ashworth of Capital Economics wrote in a note to clients.

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Wage growth edges back 

Average hourly earnings rose 4 cents to $27.70, lowering the annual gain from a 10-year high of 3.4% to 3.2%.

Wage growth has picked up as employers compete for a dwindling supply of available workers. The faster pay increases haven’t yet prompted most companies to pass their rising labor costs onto consumers through higher prices, keeping inflation subdued.

But further earnings gains eventually could lead to stronger inflation, posing a dilemma for a Federal Reserve that has vowed to remain patient and forecast no interest rate hikes this year. March’s annual pullback helps keep the Fed in its market friendly wait-and-see mode.

Industries that are hiring

Health care and social assistance led the job gains with 61,000. Professional and business services added 37,000; leisure and hospitality, 33,000; and construction, 16,000.

Manufacturing cut 6,000 jobs, a second straight anemic showing after strong gains last year, indicating the struggling global economy and U.S. trade fight with China are taking a bigger toll.

Retail, which is shrinking as shoppers shift their purchases online, cut 12,000 jobs after shedding 20,000 in February.

Labor force participation dips 

The share of American adults working or looking for jobs fell to 63% from 63.2%. From September to February, the figure had climbed fairly steadily from 62.7% as a healthy labor market offering more jobs and higher wages attracted discouraged workers, seniors, disabled people and others on the sidelines.

March’s drop could indicate that labor force participation is resuming its longer-term decline as baby boomers retire. A lower participation rate means a smaller labor supply for employers that could push up wages and inflation further, possibly prompting the Fed to eventually raise rates. But the number for a single month could just be a one-off.

What it means

This was about as ideal a jobs report as markets could expect. Job growth bounced back forcefully from its poor February performance, alleviating worries of an imminent downturn in the economy.

Yet yearly wage growth, while still healthy, retreated some from the 10-year high reached two months ago. That should keep the Fed on hold for now. The Dow Jones industrial average was up about 20 points, or less than 0.1%, in mid-day trading.

At the same time, the report offers no reason for the Fed to consider cutting rates, as President Trump has urged.

“Today's data supports our call that the Fed's next move is more likely to be a hike than a cut,” Bank of America wrote in a research note.