Advertisement

U.S. added 431,000 jobs in March in sign of economic health

Click to play video: 'Biden proposes wealth, corporate tax in 2023 budget to reduce defecit' Biden proposes wealth, corporate tax in 2023 budget to reduce defecit
WATCH ABOVE: U.S. President Joe Biden proposed on Monday a minimum 20 per cent income tax on all households worth over $100 million as part of his 2023 budget, which would include unrealized gains on investments that have not yet been sold. Biden said this will reduce the government deficit by $360 billion over the next decade. He also proposed raising the corporate tax to 28 per cent – Mar 28, 2022

America’s employers extended a streak of robust hiring in March, adding 431,000 jobs in a sign of the economy’s resilience in the face of a still-destructive pandemic, Russia’s war against Ukraine and the highest inflation in 40 years.

The government’s report Friday showed that last month’s job growth helped shrink the unemployment rate to 3.6 per cent. That’s the lowest rate since the pandemic erupted two years ago and just above the half-century low of 3.5 per cent that was reached two years ago.

Read more: Average U.S. gas price slips 6 cents over 2 weeks

Despite the inflation surge, persistent supply bottlenecks, damage from COVID-19 and now a war in Europe, employers have added at least 400,000 jobs for 11 straight months. In its report Friday, the government also sharply revised up its estimate of hiring in January and February by a combined 95,000 jobs.

Story continues below advertisement

The March report sketched a bright picture of the job market, with steady hiring and rising wages in many industries. Average hourly pay has risen a strong 5.6 per cent over the past 12 months, welcome news for employees across the economy.

Click to play video: 'Canada’s unemployment rate returns to pre-pandemic level' Canada’s unemployment rate returns to pre-pandemic level
Canada’s unemployment rate returns to pre-pandemic level – Mar 27, 2022

Still, those pay raises aren’t keeping up with the spike in inflation that has put the Federal Reserve on track to raise rates multiple times, perhaps aggressively, in the coming months. Those rate hikes will result in costlier loans for many consumers and businesses. In the meantime, worker pay raises, a response in many cases to labor shortages, are themselves feeding the economy’s inflation pressures.

Since the pandemic struck in 2020, many people have remained on the sidelines of the job market, a trend that has contributed to the worker shortage in many industries. But in an encouraging sign for the economy, 418,000 people began looking for a job in March, and many found one.

Story continues below advertisement

Over the past year, 3.8 million people have rejoined the labor force, meaning they now either have a job or are looking for one. The size of the labor force is now just 174,000 shy of its level in February 2020, just before the pandemic slammed into the economy.

Read more: U.S. sees strong job gains in January despite Omicron surge

The job growth in March, though solid, was the lowest since September. Jason Pride, chief investment officer of private wealth at Glenmede, said it reflected the job market’s durability in the midst of numerous obstacles.

“The U.S. labor market remains a bright spot in an otherwise challenging economic environment beset by inflation and geopolitical risks,” Pride said, “taking meaningful strides in moving past the COVID-19 pandemic.”

Across the economy, hiring gains were widespread last month. Restaurants and bars added 61,000 jobs, retailers 49,000, manufacturers 38,000 and hotels 25,000. Construction jobs rose by 19,000 and have now returned to their pre-pandemic level.

Read more: Employers revamp hiring plans to meet talent crunch, demand for hybrid work

Some economists sounded a note of caution, though, suggesting that the prospect of much higher borrowing rates engineered by the Fed will inevitably slow the job market and the overall economy.

Story continues below advertisement

“We continue to expect that the Federal Reserve will move rates up expeditiously to counter surging inflation, and that this report only adds more urgency to their plans to do so,” said Mike Fratantoni, chief economist at the Mortgage Bankers Association.

For now, the job market continues to rebound with unexpected speed from the coronavirus recession. Job openings are at a near-record level, and applications for unemployment benefits have dropped to near their lowest point since 1969.

Click to play video: 'New survey finds 56% of people would look for new job if they had to return to the office' New survey finds 56% of people would look for new job if they had to return to the office
New survey finds 56% of people would look for new job if they had to return to the office – Mar 23, 2022

Fueled by generous federal aid, savings amassed during the pandemic and ultra-low borrowing rates orchestrated by the Fed, U.S. consumers have spent so fast that many factories, warehouses, shipping companies and ports have failed to keep pace with their customer demand. Supply chains have snarled, forcing up prices.

As the pandemic has eased, consumers have been broadening their spending beyond goods to services, such as health care, travel and entertainment, which they had long avoided during the worst of the pandemic. The resulting high inflation is causing hardships for many lower-income households that face sharp price increases for such necessities as food, gasoline and rent.

Story continues below advertisement

It’s unclear how long the economy can maintain its momentum of the past year. The government relief checks are gone. The Fed raised its benchmark short-term interest rate two weeks ago and will likely keep raising it well into next year. Those rate hikes will result in more expensive loans for many consumers and businesses.

Inflation has also eroded consumers’ spending power: Hourly pay, adjusted for higher consumer prices, fell 2.6 per cent in February from a year earlier — the 11th straight month in which inflation has outpaced year-over-year wage growth. According to AAA, average gasoline prices, at $4.23 a gallon, are up a dizzying 47 per cent from a year ago.

Read more: Meat and cheese top stolen items as experts warn grocery theft on the rise

Squeezed by inflation, some consumers are paring their spending. The Commerce Department reported Thursday that consumer spending rose just 0.2 per cent in February — and fell 0.4 per cent when adjusted for inflation — down from a 2.7 per cent increase in January.

Still, the job market has kept hurtling ahead. Employers posted a near-record 11.3 million positions in February. Nearly 4.4 million Americans quit their jobs, a sign of confidence that they could find something better.

Click to play video: 'How are companies attracting workers in a tight labour market?' How are companies attracting workers in a tight labour market?
How are companies attracting workers in a tight labour market? – Mar 11, 2022

Sponsored content