March job additions miss projections, but economists have rosy outlook

The national labor market continued its solid progression in March, adding 431,000 nonfarm jobs during the month, according to the U.S. Bureau of Labor Statistics.

The addition was smaller than some gains registered during recent months and came in below consensus expectations. Economists polled by Reuters anticipated an increase of 490,000 jobs in March. But gains were healthy nonetheless, with notable growth in the leisure and hospitality sector, which added 112,000 jobs. Professional and business services grew by 102,000 jobs while retail trade added another 49,000.

The leisure and hospitality sector is now down 8.7% since February 2020 when the COVID-19 pandemic began. That’s still a substantial reduction but far improved since the segment’s plunge during the worst days of the health crisis. Overall employment is now down 1.6 million jobs — about 1% — compared to the February 2020 pre-pandemic level.

“Approximately 93% of the jobs lost in the pandemic have been regained,” said Odeta Kushi, deputy chief economist at First American Financial Corp. “If monthly gains continue at the March pace, we could return to the pre-COVID employment peak by July 2022.”

Wells Fargo economists Sarah House and Michael Pugliese said that the hiring backtrack in March “leaves nothing to be concerned about on the labor front.” Instead, the 431,000 increase in payrolls offered a “cleaner read” on hiring trends since reports over the past few months have been impacted by unusual seasonal dynamics and the omicron strain that caused a wave of new infections.

“Hiring continues along at a robust pace that is still more than twice the average of the past expansion,” the pair wrote in commentary for the bank’s economics group.

The jobs report also showed more people reentering the workforce as the unemployment rate dropped to 3.6% (a two-year low) and the labor force participation rate at 62.4%, a cycle high. The prime-age labor force participation rate inched upward to 82.5% — still below the pre-pandemic figure but an encouraging increase nonetheless, Kushi said.

Economic concerns due to inflation, coupled with the drop-off in government financial stimulus, should keep labor supply moving upward in the near term, Wells Fargo noted. Wage growth also is attracting more people back to the workforce, with average hourly earnings up 5.6% year over year in March.

Directly relating to the real estate sector, construction continued its upward trend with 19,000 jobs added in March, bringing construction employment back to where it was before the pandemic started. Residential building construction, which is in fact up 6% in comparison to pre-pandemic levels, actually declined by 2,600 jobs in March, although there was a large uptick of 10,200 jobs in residential specialty-trade contractors.

“Overall, a net gain of 7,600 jobs for residential construction, which is good news for this labor-intensive industry and for the prospect of more housing supply,” Kushi said.


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