The U.S. economy created just 98,000 new jobs in March, the Bureau of Labor Statistics reported Friday, but the release also contained encouraging news as the unemployment rate dropped to 4.5 percent, the lowest since May of 2007.
The disappointing aspect of Friday’s report was the survey of businesses, which showed weaker payroll jobs growth than the 175,000 forecasters expected, revised down the jobs numbers for February and January. But the underlying trend of job growth remained intact, and the household survey contained better news.
“It’s obviously a mixed bag,” said Mark Hamrick, senior economic analyst for Bankrate.com.
While March’s job growth represented a significant slowdown, the drop-off was likely influenced by a major East Coast snowstorm during the week surveys were conducted.
And although the report is the weakest of President Trump’s young presidency, it won’t be enough to significantly downgrade economists’ broader assessment of the health of the labor market, especially as details from the survey of households hinted at strength.
Over first three months of Trump’s tenure, monthly job gains have averaged 178,000.
That’s well more than the 50,000 to 100,000 jobs a month that are needed to match population growth and keep unemployment trending down, according to an October analysis from the Federal Reserve Bank of Chicago.
The underlying trend may be even stronger than March’s numbers would suggest, given that Winter Storm Stella kept workers off job sites and delayed projects during the week that the Census Bureau was surveying businesses. Stella may have decreased jobs by 30,000 to 60,000, according to Goldman Sachs economists. And 3.1 million people saw their hours cut in March because of weather, far more than the roughly 388,000 average for the past five years.
Meanwhile, the unemployment rate fell two tenths of a percentage point for the right reason, namely because employment grew, and not because of people dropping out of the workforce.
In fact, after years of the workforce declining because of both population aging and workers quitting the job hunt out of frustration, labor force participation has hovered around 63 percent over the past three years-plus. More people seeking jobs is a good sign, and unexpected given the ongoing retirement of Baby Boomers.
Perhaps the clearest sign of the ongoing improvement in prospects for workers is that the employment rate for prime-age workers reached a new post-recession high of 78.5 percent in March.
Nevertheless, it appears there is room for significantly more employment growth in the months ahead, as prime-age employment is still below pre-recession levels. Wage growth, meanwhile, remains modest, suggesting that that the labor market is still not so tight that employers have to bid against each other to hire new employees. Average hourly earnings were up 2.7 percent on the year in March, in line with the long, slow upward trend.
Resilient job creation, at a time when lower unemployment has made it harder for some employers to find help, has forced the Federal Reserve in recent weeks to re-calculate how quickly to tighten monetary policy this year.
Nearly all members of the Fed believe that the U.S. is at or near full employment, according to minutes of their March meeting released Wednesday, meaning that the central bank cannot drive unemployment much lower through easy money. Friday’s release likely won’t sway their views significantly one way or another.
In March, underemployment was at the lowest level since the month of the official start of the recession. The “U6” unemployment rate, which captures not only the unemployed but also those forced into part-time work and those only sporadically looking for work, dropped from 9.2 percent to 8.9 percent, the lowest since December of 2007.
The construction and mining industries are partly to thank for the recent stretch of strong jobs growth. Retail, however, has been hammered since October, losing 89,000 jobs during that time. Given recent job cut announcements, retail will continue shrinking in the months ahead. “There’s more pain to come,” said Hamrick.
