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US Hiring Eases in March as Economy Shows Signs of Cooling

April 10, 2023
"The data show that the labor market remains strong with the economy still creating jobs at a rapid pace," said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.

U.S. job gains eased in March for a second straight month, government data showed Friday, adding to signs that the world's largest economy is cooling as policymakers push on in their fight against inflation.

The labor market data is closely watched for its potential impact on the Federal Reserve's policy decisions -- but analysts believe the latest figures will not be enough to prompt a pause in the central bank's interest rate hikes.

The report "shows that we continue to face economic challenges from a position of strength," said President Joe Biden in a statement, though he conceded that "there is more work to do."

The country added 236,000 jobs last month, slightly less than expected, while the unemployment rate inched down to 3.5%, the Labor Department said Friday.

These numbers came days after separate reports showed hiring by private U.S. companies and services sector activity eased as well.

But wage growth was solid with average hourly earnings rising 0.3% to $33.18, according to the latest data.

Compared with a year ago, wages increased 4.2%.

"Employment continued to trend up in leisure and hospitality, government, professional and business services, and health care," said the Labor Department.

The report added that the labor force participation rate continued to move up last month as well.

The figures could bring some relief to policymakers who have been battling to rein in stubborn inflation.

To ease demand, the Fed has lifted the benchmark lending rate nine times since early last year.

- 'Hints' of adjustment -

"The data show that the labor market remains strong with the economy still creating jobs at a rapid pace," said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.

However, there appear to be hints of an adjustment, she added.

This is seen in areas like a higher level of jobless claims and a decline in job openings.

"But with inflation remaining sticky, we anticipate the Fed will hold rates higher for some time, looking for a more significant easing of price pressures," she said.

For now, softer job growth "will comfort Fed officials that the most aggressive monetary policy tightening in four decades is starting to take effect," said Oren Klachkin, lead U.S. economist at Oxford Economics.

While the March employment data alone are "nothing like weak enough to persuade the Fed to leave rates on hold in May," a continued surge in jobless claims, softer retail sales and cooling inflation could tip the balance, said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

- Tighter conditions ahead -

Shepherdson also cautioned that March data are effectively a "look back into the pre-SVB world," noting that the payroll survey was conducted the week after Silicon Valley Bank failed.

This was "far too soon for employers to have responded," he said, adding that a hit from tighter credit conditions is coming.

The dramatic collapse of SVB and, shortly after, Signature Bank in March unleashed turmoil in the banking sector -- prompting U.S. authorities to launch a coordinated effort to prevent contagion.

Although the banking shock itself did not have a massive impact on jobs, Klachkin of Oxford Economics expects that the resultant tightening in lending standards "will weigh on job creation."

All of this complicates the Fed's job as the central bank tries to balance its rate hikes to lower inflation against financial stability.

Copyright 2023, Agence France-Presse

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