U.S. employers added 303,000 jobs in March, showing strong economy

In March, U.S. employers once again significantly added jobs, adding 303,000 employees, boosting hopes that the economy can beat inflation and avoid recession in the face of high interest rates.

Last month’s job growth was up from a revised 270,000 in February and well above economists’ forecasts of 200,000. It was a strong month for employment by any measure, reflecting the economy’s ability to withstand the pressure of higher borrowing costs from the Federal Reserve’s rate hikes. As consumers across the country continue to spend money, many employers continue to hire to meet steady customer demand.

Friday’s Labor Department report also showed the unemployment rate fell to 3.8% from 3.9% in February. The ratio has now stayed below 4% for 26 consecutive months, the longest consecutive downward trend since the 1960s.

Typically, large numbers of new jobs raise concerns that the extra spending from these new workers could accelerate inflation. But the March jobs report showed modest wage growth last month, which may allay such concerns. Average hourly earnings increased 4.1% year-on-year, the smallest year-over-year increase since mid-2021. But hourly wages rose 0.3% from February to March, after rising 0.2% the previous month.

The economy is sure to weigh on Americans as they assess President Joe Biden’s reelection bid as the November presidential vote approaches. Many are still squeezed by the surge in inflation that hit in the spring of 2021. The Federal Reserve’s 11 interest rate hikes have helped inflation fall from its peak in the past year and a half. But the average price is still about 18% higher than in February 2021 – a move that could cost Biden politically.

Federal Reserve policymakers are tracking the economy, job market and inflation to determine when to begin cutting interest rates from multi-decade highs – a move eagerly awaited by Wall Street traders, businesses, homebuyers and people who need cars, home appliances and, in general, Financing other major purchases. Over time, the Fed’s rate cuts could lead to lower borrowing rates across the economy.

Central bank policymakers began raising interest rates two years ago in an attempt to curb inflation, which by mid-2022 had reached its highest level in four years. These rate hikes – including 11 between March 2022 and July 2023 – have helped slow inflation significantly. Consumer prices rose 3.2% year-on-year in February, well below the year-on-year peak of 9.1% in June 2022.

However, the Federal Reserve’s interest rate hikes have led to a sharp increase in borrowing costs for individuals and businesses, which is widely expected to trigger a recession, triggering a wave of layoffs and a sharp rise in unemployment. However, to the surprise of almost everyone, the economy continues to grow steadily and employers maintain a healthy hiring pace. Layoffs remain low.

Some economists believe that increases in productivity (the amount of output a worker produces per hour) make it easier for companies to hire, raise wages and earn greater profits without raising prices. Furthermore, the influx of immigrants into the job market is credited with solving labor shortages and slowing upward pressure on wage growth. This could help cool inflation even as the economy continues to grow.

Meanwhile, the Federal Reserve has signaled it expects to cut interest rates three times this year. But it is awaiting more inflation data for further confidence that annual price growth is on track to target its 2% target. Some economists have begun to question whether the Fed will need to cut interest rates soon given the continued durability of the U.S. economy.