The job market cooled slightly in March as employers added 431,000 jobs, the Labor Department reported on Friday.
That is down from February’s 678,000 and also below expectations for around 470,00.
The unemployment rate, meanwhile, ticked down to 3.6% from last month’s 3.8% and is now hovering close to its pre-pandemic record level of 3.5%
The leisure and hospitality sector led the increase, with a gain of 112,000 jobs for the month.
“Overall employment is now just 1% from its pre-pandemic level,” Elise Gould, economist at the Economic Policy Institute, tweeted. “Private-sector jobs record strong gains rising 426,000 in March with notable jobs added in leisure and hospitality, professional and business services, and retail trade. Public-sector employment still slow to return.”
While economists forecast a slowdown of the economy in 2022, the labor market is showing no sign of that. This week, private payroll firm ADP’s monthly survey for March showed 455,000 jobs were added while first-time claims for unemployment benefits were 202,000, a strong level. Meanwhile, the government reported that more than 11 million jobs were open in February.
“What we see very consistently is that a large majority of our clients are out there still trying to hire people,” says Dan Swan, co-lead of McKinsey’s global operations practice.
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The ADP report found that hiring was especially strong in the services sector, a sign that gains could continue for a while as the leisure and hospitality industries were the most affected by the coronavirus pandemic.
But jobs are also going begging in the manufacturing and industrial areas, says Paul Wellener, vice chairman and U.S. industrial products and construction leader, Deloitte LLP.
“The relatively small monthly payroll data fluctuations for manufacturing are not enough to move the needle across the overarching gap of 808,000 open positions in the sector,” Wellener says. “The pace that manufacturing is retaining employees and adding jobs is woefully insufficient.”
Others point out that with employee turnover also high because of the record number of jobs open, monthly job gains are only one part of the picture of the labor market.
“Payroll jobs gains are certainly important, but, if we want to see inflationary pressures ease and companies feeling positive concerning their future ability to hire, this is about getting labor force participation back to where it was pre-pandemic,” says Ron Hetrick, senior economist at Emsi Burning Glass.
“The math doesn’t add up,” Hetrick adds. “We keep seeing payroll job gains but job openings are not going down. Companies should be implementing a retention plan to retain their current workforce.”
While economists expect the economy to slow in 2022 from its 2021 pace, many reports show that businesses are still seeing robust growth. A survey out Wednesday from Kabbage, an American Express company, found that small businesses saw their average monthly revenues increase 77% in the past six months, from $47,900 in July 2021 to $84,935 in February 2022. Additionally, their monthly profits rose 39% on average in the same period.
“Small businesses are preparing for a new type of market. One that’s not driven by the direct impact of COVID-19 – but rather, one determined by the economic aftermath of the pandemic,” said Kathryn Petralia, co-founder of Kabbage. “Economic indicators like inflation will require adjustments, but the new data illustrates how small businesses are making changes and adapting.”