Employers added 236,000 jobs in March, marking solid labor market growth

WASHINGTON (AP) — U.S. employers added 236,000 solid jobs in March, reflecting a resilient job market and suggesting the Federal Reserve may see the need to keep raising interest rates in the months ahead.

The jobless rate fell to 3.5%, not far above the 53-year low of 3.4% set in January. Last month’s job growth was down from February’s meteoric gain of 326,000.

Friday’s government report suggested the economy and labor market remain on solid footing despite nine rate hikes imposed over the past year by the Fed. March job creation could lead the Fed to conclude that the pace of hiring is still putting upward pressure on wages and inflation and that further rate hikes are needed. When the central bank tightens credit, it usually leads to higher rates on mortgages, auto loans, credit card borrowings, and many business loans.

Despite last month’s strong job growth, the latest economic signs increasingly suggest that an economic slowdown may be upon us. Manufacturing is weakening. America’s trade with the rest of the world is in decline. And while restaurants, retailers and other service businesses continue to grow, they do so more slowly.

For Fed officials, controlling inflation is the first task. They were slow to react after consumer prices started to climb in the spring of 2021, concluding that it was only a temporary consequence of the supply bottlenecks caused by the rebound surprisingly booming economy after pandemic recession.

It wasn’t until March 2022 that the Fed started raising its key rate from near zero. Over the past year, however, it has raised rates more aggressively than it has done since the 1980s to tackle the worst bout of inflation since then.

And as borrowing costs have risen, inflation has steadily fallen. The latest year-on-year consumer inflation rate – 6% – is well below the 9.1% rate reached last June. But it remains well above the Fed’s 2% target.

To complicate matters, the turmoil in the financial system. Two major U.S. banks failed in March, and higher rates and tighter credit conditions could further destabilize banks and lower consumer and business borrowing and spending.

The Fed aims to achieve a so-called soft landing – slowing growth just enough to bring inflation under control without sending the world’s largest economy into recession. Most economists doubt it works; they expect a recession later this year.

So far, the economy has shown resilience in the face of ever-higher borrowing costs. U.S. gross domestic product — the economy’s total output of goods and services — grew at a healthy pace in the second half of 2022. Yet recent data suggests the economy is losing momentum.

On Monday, the Institute for Supply Management, an association of purchasing managers, reported that U.S. manufacturing activity contracted in March for a fifth consecutive month. Two days later, the ISM said growth in services, which accounts for the vast majority of US employment, had slowed sharply last month.

On Wednesday, the Commerce Department reported that U.S. exports and imports both fell in February, a further sign of a weakening global economy.

The Labor Department said Thursday it has adjusted the way it calculates the number of Americans filing for unemployment benefits. The tweak added nearly 100,000 claims to its numbers over the past two weeks and could explain why massive layoffs in the tech industry this year hadn’t yet made it onto unemployment rolls.

The Labor Department also reported this week that employers posted 9.9 million job openings in February, the fewest since May 2021, but still far more than anything seen before 2021.

In its quest for a soft landing, the Fed expressed hope that employers would ease wage pressures by advertising fewer vacancies rather than cutting many existing jobs. The Fed also hopes more Americans will start looking for work, increasing the supply of labor and reducing pressure on employers to raise wages.

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