The U.S. job market has been a bastion of stability in an unstable world in recent years, with employers consistently adding jobs in the face of conflict and uncertainty both at home and overseas. There’s no reason to think that is changing, despite a mildly disappointing jobs report on Friday.
U.S. employers added 98,000 jobs in March, the Bureau of Labor Statistics reported Friday. That represents a sharp slowdown from February and fell well short of economists’ expectations. It was the weakest monthly job growth in close to a year.
But don’t get fooled by dour headlines. Friday’s numbers were preliminary and will be revised at least twice in coming months. And even if the number stays unchanged (or gets revised down), it’s wise not to read too much into a single month of data. Numerous times over the past five years, job growth has slowed alarmingly for a month or two, only to pick up again. The longer-run trend, however, has been one of steady (though gradually slowing) growth.
That is not to say there were no signs of trouble in Friday’s report. The government also revised down its estimates for job growth in January and February; such negative revisions can sometimes be a warning sign of a more significant slowdown. Retailers cut jobs sharply for the second month in a row, and most other sectors showed slower hiring.
But the report also contained numerous bright spots. The unemployment rate fell to 4.5 percent, its lowest level in close to a decade. The labor force grew as more people came off the economy’s sidelines to look for work. And wage growth, once the great weak spot in the recovery, remained solid.
After the previous, less ambiguously strong jobs report, President Trump hailed the news (via a retweet) as evidence that the economy was “great again.” He’s stayed silent on this report so far. But despite Trump’s frequent commentary on (and criticism of) the monthly numbers both before and after the election, the best response to the report is usually to remain calm. Some day, the job market’s record run will end. But there’s no sign that is happening now.
Here are a few more observations from Friday’s report:
A weather effect? Some economists suggested that last month’s strong jobs numbers were at least partly the result of an unusually warm February in much of the U.S. That may, in turn, help explain March’s weaker numbers, if some employers in weather-sensitive industries such as construction hired people earlier than usual. Sure enough, construction companies hired fewer workers in March than in February, as did employers in similar industries.
Still, it’s unlikely that the slowdown was entirely weather driven. Hiring also slowed in the education and health care sectors, for example, which are unlikely to have been much affected by the weather.
Falling unemployment: The government only counts people as unemployed if they are actively looking for jobs. That means the unemployment rate can fall for both good reasons (more people found work) and bad (more people gave up looking). March’s drop in the unemployment rate was for good reasons: Nearly half a million more people were employed in March than in February. (These figures are based on a separate survey, and use separate definitions, than the more widely cited nonfarm payroll figures contained in the same BLS report.) Other measures of un- and underemployment showed similar declines: A broader measure that includes people who have given up looking has also been falling, and the broadest measure, which also includes people stuck in part-time jobs because they can’t find full-time work, fell to 8.9 percent, its lowest level since the start of the 2008-09 recession.
A larger labor force: Throughout the recession and recovery, the share of Americans participating in the labor force — meaning they were either working or actively looking for work — kept falling, hitting a multidecade low in 2015. More recently, however, the so-called participation rate has stabilized, as improving job prospects and rising wages have drawn more Americans back into the workforce.
The participation rate is fighting a strong demographic headwind: Retiring baby boomers, whose exit from the labor force, all else equal, would tend to push the rate down. As a result, most economists don’t expect the participation rate to rise significantly; the recent flattening out, therefore, is probably a sign of strength.
Slower hiring in manufacturing: Both during the campaign and since taking office, Trump has stressed the importance of the U.S. manufacturing sector. Manufacturers added 11,000 jobs in March, a substantially slower rate than in February. But another sector that Trump has emphasized, energy, has shown some recent rebound (although there’s no reason to attribute that to Trump); the mining sector, which includes oil and gas producers, has now added jobs for five straight months following a long decline.