U.S. Job Growth Continues to Ease but Remains on Solid Footing

Job growth in the U.S. eased in March amid historic interest rate hikes to bring down inflation. However, the cooling is not happening nearly as fast as the Fed would desire. Despite nine rate hikes imposed by the Fed over the past year to curb inflation, the pace of hiring is still putting upward pressure on wages and inflation. And yet, pay increases aren’t keeping up with high inflation. Though easing, job growth remains solid, and the unemployment rate remains historically low.

Employers’ steady demand for labor added roughly 236,000 employees to payrolls in March 2023, according to the Bureau of Labor Statistics (BLS). That was the weakest month-over-month change since December 2020. The nation’s recent job additions were in line with economist’s projections (239,000 jobs) but were well below February’s gain of 326,000 jobs and below the monthly average of around 399,000 jobs added in 2022. 

Despite the slowdown, employers are still adding more workers than they did prior to the pandemic, when job gains averaged roughly 190,000 each month from 2015 to 2019. On an annual basis, the nation gained roughly 4.14 million jobs in March 2023. Although down from the annual gains recorded throughout much of 2021 and 2022, that was well above the average of around 2.4 million jobs added annually from 2015 to 2019.

Downward revisions to January 2023 data showed 32,000 fewer jobs were added than previously reported, down to 472,000 jobs. The February 2023 job growth number was revised up by 15,000 jobs, to a total of 326,000 jobs. With these revisions, employment gains in January and February combined were 17,000 lower than previously reported.

The U.S. economy has recovered all the net jobs lost during the COVID-19 pandemic. As of March, the nation had nearly 3.2 million more jobs (+2.1%) compared to the pre-pandemic employment level from February 2020.

Jobs by Industry

Job growth in March was most notable in the Leisure and Hospitality Services and Education and Health Services industries. On the other hand, employment declined in Construction, Manufacturing and Financial Activities.

Most job sectors have recovered all the jobs lost during the COVID-19 pandemic downturn. Professional and Business Services has seen the best recovery, with today’s job count coming in more than 1.5 million positions ahead of February 2020 numbers. Trade, Transportation and Utilities is also well ahead of pre-pandemic norms, with employment up more than 1.1 million jobs.

Alternatively, some of the harder-hit sectors remain below pre-pandemic job counts. Despite recent gains, employment in the Leisure and Hospitality Services sector is still well below its pre-pandemic employment count, by roughly 368,000 workers. The Government sector is about 314,000 jobs behind February 2020 levels. Other industry sectors yet to recover all jobs lost during the COVID-19 downturn include Other Services (-105,000 jobs) and Mining and Logging (-51,000 jobs).

Unemployment

The unemployment rate (U3 or headline unemployment rate) in March clocked in at 3.5%, down slightly from the 3.6% rate in February and just under the 54-year low of 3.4% recorded in January. Over the past year, the unemployment rate has been in a narrow range of 3.4% to 3.7%. At the onset of the pandemic, the unemployment rate climbed to 14.7% in April 2020. Prior to the pandemic, the unemployment rate clocked in at 3.5% to 5.7% from 2015 to 2019, averaging 4.4% during that period.

The total number of unemployed in the U.S. edged up to roughly 5.8 million in March, with that measure showing little movement since early 2022.

The unemployment rate for adult men increased 10 basis points (bps) from February to March, rising to 3.4%. The unemployment rate for adult women decreased 10 bps, easing to 3.1%. Meanwhile, the unemployment rate for teenagers dropped 130 bps from 11.1% in February to 9.8% in March.

Across 12 major industries, unadjusted unemployment rates declined in seven from February to March. Decreases were recorded in Construction (down 100 bps to 5.6%), Wholesale and Retail Trade (down 100 bps to 4.4%), Financial Activities (down 40 bps to 1.8%), Professional and Business Services (down 30 bps to 3.9%), Leisure and Hospitality Services (down 20 bps to 5%), Information (down 10 bps to 3.1%) and Manufacturing (down 10 bps to 2.9%). The unemployment rates in Education and Health Services and Government were unchanged from February to March, at 2.4% and 1.7%, respectively. Conversely, the biggest increase in unemployment was recorded in the Mining industry, up 350 bps to 6.5%. 

The highest industry unemployment rates (not seasonally adjusted) in March were in Mining (6.5%), Construction (5.6%), Leisure and Hospitality Services (5%), Transportation and Utilities (4.6%) and Wholesale and Retail Trade (4.4%). The lowest unemployment rates were in the Government (1.7%), Financial Activities (1.8%) and Education and Health Services (2.4%) sectors. 

Average Hourly Earnings

Average hourly earnings among employees on private nonfarm payrolls rose $0.09 (+0.3%) from February to March. That monthly increase took average hourly earnings to $33.18 in March. On an annual basis, average hourly earnings were up $1.35, a 4.2% increase year-over-year. However, wages were outstripped by inflation, as the Consumer Price Index (CPI) rose 6% in the year-ending February. The Fed’s target for inflation is currently at 2%.

Wage growth over the past year varied by industry, ranging from a year-over-year increase in hourly wages of 3.1% among Other Services employees, to a jump of 6.1% among Leisure and Hospitality Services workers.