America’s employers delivered another outpouring of jobs in March, adding a sizzling 303,000 workers to their payrolls and bolstering hopes that the economy can vanquish inflation without succumbing to a recession in the face of high interest rates.
Last month’s job growth was up from a revised 270,000 in February and was far above the 200,000 jobs that economists had forecast. By any measure, it amounted to a major burst of hiring, and it reflected the economy’s ability to withstand the pressure of high borrowing costs resulting from the Federal Reserve’s interest rate hikes. With the nation’s consumers continuing to spend, many employers have kept hiring to meet steady customer demand.
Friday’s report from the Labor Department also showed that the unemployment rate dipped from 3.9 percent to 3.8 percent. The jobless rate has now remained below 4 percent for 26 straight months, the longest such streak since the 1960s. The government also revised up its estimate of job growth in January and February by a combined 22,000.
Normally, a blockbuster bounty of new jobs would raise concerns that a vibrant labor market would force companies to sharply raise pay to attract and keep workers, thereby fanning inflation pressures. But the March jobs report showed that wage growth was mild last month, which might allay any such fears. Average hourly wages were up 4.1 percent from a year earlier, the smallest year-over-year increase since mid-2021. From February to March, though, hourly pay did rise 0.3 percent after increasing 0.2 percent the month before.
The 303,000 jobs that the economy added in March were the largest gain since last May. And they boosted average monthly job growth so far this year to a vigorous 276,000, an improvement even on 2023’s robust average of 251,000.
The unemployment rate fell last month even though a sizable 469,000 people entered the labor force looking for work. That influx increased the proportion of Americans who either have a job or are looking for one from 62.5 percent in February to 62.7 percent. A bigger labor force tends to ease pressure on companies to significantly raise wages, thereby slowing inflation pressures.
Though most industries added jobs last month, hiring was mainly concentrated in three categories: Healthcare and private education, leisure and hospitality and government accounted for nearly 69 percent of the hiring. In addition, construction companies added a solid 39,000 jobs.
Some economists believe that a rise in productivity — the amount of output that workers produce per hour — made it easier for companies to hire, raise pay and post bigger profits without having to raise prices. In addition, an influx of immigrants into the job market is believed to have addressed labor shortages and slowed upward pressure on wage growth. This helped cool inflation even as the economy kept growing.
“This report is like the macroeconomist’s Holy Grail,’’ said Julia Pollak, chief economist at the online job marketplace ZipRecruiter. “It’s pointing toward noninflationary growth.”
Noting the strong job growth, influx of new workers, declining unemployment and slowing wage growth, Pollak said, “It suggests that the Fed can walk and chew gum at the same time, bringing down inflation without crippling the labor market.”
In the meantime, the Federal Reserve has signaled that it expects to cut rates three times this year. But it is awaiting more inflation data to gain further confidence that annual price increases are heading toward its 2 percent target. Some economists have begun to question whether the Fed will need to cut rates anytime soon in light of the consistently durable U.S. economy.