The U.S. economy added 431,000 new jobs in March

A blistering pace: U.S. adds nearly as many jobs in Q1 2022 as the entire year of 2019

With 431,000 new jobs added to the U.S. economy in March, the first quarter of 2022 has almost surpassed growth during the entire year in the year before the pandemic—2019.  Specifically, there were 1.7 million new jobs added between January and March, compared to 2.0 million jobs over the course of 12 months in 2019.  At the current pace, jobs growth will surpass 2019’s total by the end of April, and further gains will be accretive to the total in 2022. 

Although the total for March came in a bit below the consensus expectation of 490K, quarterly growth was given a boost by an upwardly revised total of +750K jobs added in February. 

Sector-specific gains continue  

Leisure and hospitality continues to add new jobs at a good clip, hiring 112,000 new workers in the month of March, slightly below the 6-month average of +154,000.

In the goods-producing sector, manufacturing employment rose by 38,000 in March, the same increase as in February and close to the sector’s six-month trend of +41,000.  It should be noted that manufacturing is a cyclically sensitive sector of the economy. The robust hiring is evidence that the economic expansion remains on track despite the challenges of higher inflation.

Finally, professional and business-services employment increased by 102,000 jobs.

Labor force participation is up, and unemployment is down

Unemployment continues its downward trend, and labor-force participation is ticking up – the latter a sign that more people have reentered the workforce.

As a demonstration of the labor market’s strength, the unemployment rate fell 0.2 percentage points to 3.6% in March – down from 3.8% in February and 4.0% in January This puts the current unemployment rate within striking distance of the pre-COVID low of 3.5%, which was evident during the last economic expansion between 2009-2020.  We believe the unemployment rate could continue to improve in the current cycle and fall below 3.5% over the coming months.

Despite the “Great Resignation,” the labor-force participation rate ticked up to 62.4% from 62.3%, a positive sign that workers are actively in search of employment.  Given that COVID remains a factor in job seekers’ decision making, the improvement here will likely remain slow as a subset of the population continues to avoid employment due to health concerns.

Wages on the increase, for now

On the wage front, average hourly earnings recovered to 5.6% y/y in March, after dipping to 5.2% in February.  While rising labor-force participation would help tamp down wages, it will take a more pronounced increase in participation to alleviate wage-growth pressure.   

Recession unlikely, despite global volatility

Today’s data supports the likelihood that there will be another quarter percent increase in the federal funds rate target at the next Federal Open Market Committee (FOMC) meeting on May 4.  The number of potential rate increases this year -- as well as the recent volatility in global financial markets due to the Russia-Ukraine war --has raised speculation of an economic downturn later this year. However, we believe the probability of a U.S. economic recession over the coming year remains low, as the economy is solid enough to withstand some volatility, including multiple increases in the Fed’s policy rate over the course of this year.