March Jobs Report: Job Market Still Red Hot Despite Slight Slowing

The latest jobs numbers are out from the U.S. Bureau of Labor Statistics. What do they mean for job seekers, employers and investors? Here’s a quick take from Glassdoor Senior Economist Daniel Zhao.

The job market is still red hot as employers continue adding workers hand-over-fist and workers return to the labor force. Employers added 431,000 jobs in March, down from 750,000 jobs in February, but still healthy. The unemployment rate improved more than expected, ticking down to 3.6 percent from 3.8 percent, just 0.1 percentage point higher than the pre-pandemic level. As the Federal Reserve begins hiking interest rates, the labor market is healthy. 

Steady Payroll Growth Keeps Recovery On Track

Payroll employment rose 431,000 in March. February job gains were revised up from 678,000 jobs added to 750,000. The upward revision in February helps make up the modest gap in March between the print and expectations. This is the eleventh month in a row where job gains have exceeded 400,000 and puts the labor market 1.58 million jobs shy of pre-pandemic employment levels. If 2022's pace of jobs growth continues, we would reach the pre-pandemic jobs benchmark as early as June. 

The industries with the largest job gains were leisure & hospitality (+112,000 jobs), professional & business services (+102,000) and health care & social assistance (+53,000). Leisure & hospitality and health care & social assistance are two industries with the largest job shortfalls compared to pre-crisis levels, so continued recovery there will be important to pushing employment back to pre-pandemic levels.

Unemployment Drops to 3.6 Percent

The unemployment rate fell to 3.6 percent in March, a fresh pandemic low and only 0.1 percentage point short of the pre-pandemic level. The prime-age (25-54) labor force participation rate shot up to 82.5 percent, a surprising 0.3 percentage point jump and just 0.5 percentage points shy of pre-pandemic levels in a sign that the vast majority of workers are continuing to return to the workforce.

The Black unemployment rate fell to 6.2 percent in March from 6.6 percent in February. The unemployment rate for Black workers is at the lowest level it has been at the start of a Fed rate hike cycle. In December 2015, the Black unemployment rate was 8.5 percent and in June 2004, 10.2 percent.

Month-over-Month Wage Growth Rebounds

After only rising 0.1 percent in February, average hourly earnings grew more rapidly in March, rising 0.4 percent month-over-month. Year-over-year, average hourly earnings rose 5.6 percent. Wage growth is likely to stay elevated in the coming months as labor demand remains high. However, with inflation at 7.9 percent, workers are growing increasingly worried about their pay not keeping up with inflation. Annual growth in average hourly earnings has not exceeded 6 percent for much of the recovery, making faster wage gains difficult to expect. 

What's Coming Next

The job market is red hot with high employer demand continually driving healthy job gains and a steady stream of workers back into the labor force. The persistent increase in prime-age labor force participation and decline in unemployment is an indicator that Americans are looking for work and employers are hiring them. Concerns about labor shortages seem to be more about employer competition than about Americans not working.

The coming months will be a test for the labor market with the Federal Reserve starting to hike rates, the war in Ukraine disrupting global supply chains, inflation continuing to surge and the stimulus of fiscal relief fading. Today's report adds confidence that we're still experiencing a hot labor market with a healthy buffer to fight any headwinds, but the last two years have demonstrated that we can't rule out any surprise curveballs.

More Insights

Employers added 431,000 jobs in March, slower than the last few months, but February was revised up to 750,000 jobs added, the highest rate of job gains since September 2020. Even the slower number in March is still a fast rate of jobs growth.

So far in 2022, we're averaging around 562,000 monthly jobs added, which puts us on pace to return to pre-pandemic job levels in June. That's close to the pace of recovery following the 1981 recession, though from a starting point of much more severe job losses.

Job gains were broad-based, appearing in almost every major sector, led by leisure & hospitality (+112,000), professional & business services (+102,000), education & health services (+53,000). Both service-providing and goods-producing sectors both saw solid job gains.

One exception was transportation & warehousing which was surprisingly weak—500 jobs lost in March, compared to 69,700 added in February—after many months of strong job gains. Within the sector, job gains slowed for truck transportation—4,900 lost in March vs. 10,000 added in February—and warehousing & storage—4,300 added in March vs. 26,600 added in February.

Despite the weakness in March, transportation & warehousing is still significantly above pre-pandemic employment levels. On the other hand, leisure & hospitality, government and education & health services have the largest remaining shortfalls.

Average hourly earnings bumped up to 5.6 percent in March after a slowdown in February. That's still not quite enough for the average worker to keep up with average inflation rates, but there are pockets of the economy seeing faster wage growth.

For example, wage growth for production & nonsupervisory workers in leisure & hospitality is at 14.9 percent year-over-year. That's not as high as in December, but it's still solidly in double-digit territory for an industry where frontline workers are hesitant to return.

The unemployment rate dropped to 3.6 percent in March, just shy of the 3.5 percent pre-pandemic level. And reminder: the 3.5 percent rate we reached in 2019-2020 was the lowest level since 1969. With continued progress, we may be able to beat that in 2022.

The Black unemployment rate dipped to 6.2 percent, though it was on the back of a slight drop in labor force (-11,000). The month-to-month numbers are volatile by demographic group, but the overall trend is one of both improving labor force participation and unemployment.

One of the highlights of the report: the prime-age labor force participation (25-54) jumped an impressive 0.3 percentage points in March, hitting 82.5 percent, just 0.5 percentage points short of pre-pandemic levels. Americans are by and large returning to work.

Employees absent due to illness fell to 1.1 million in March, continuing to drop from their record highs set in January as the Omicron wave continues to wane. As new waves strike Europe, the risk of a new wave in the U.S. is a serious concern to watch out for.