Labor market adds 236,000 jobs in March, powering economy on

The WashingTon PosT

Employers churned out 236,000 jobs in March, shoring up the economy through a period of increasing financial instability and inflation, as a resilient labor market continues to prop up the economy against all odds.

The unemployment rate ticked down to 3.5 percent last month, according to the Bureau of Labor Statistics, hovering near 50-year record lows, in part because more workers joined the workforce and some employers have held onto workers in a tight labor market.

The March jobs report marked the 27th straight month of solid job growth. While the pace of job creation has slowed, the strength of the labor market three years into the coronavirus pandemic continues to befuddle experts.

American workers, and their spending prowess, have driven the U.S. economy through incredible obstacles: a banking crisis that took down three institutions and threatened broader financial instability; higher interest rates that have chilled the housing market and parts of the financial industry; sweeping tech industry layoffs, with major employers cutting more than 160,000 jobs in three months; and persistent inflation that’s made groceries and rent much more expensive, particularly for the nation’s most vulnerable.

“The labor market remains the pillar of strength in the economy,” said Daniel Zhao, lead economist at Glassdoor. “Americans are employed, they’re getting paychecks, which of course keeps consumer spending healthy and keeps the rest of the economy running.”

Some sectors are fueling the labor market’s growth, as others have slowed. The largest job gains in March were in leisure and hospitality, health care, and government, sectors that have boomed in the pandemic recovery economy as consumers have shifted their spending away from goods toward services and experiences.

Leisure and hospitality added 72,000 jobs in March, with most of the growth in food services and bars. Employment in the industry remains below its pre-pandemic level by roughly 368,000 jobs.

G overnment added 47,000 jobs, but the sector is still working on recovering pandemicera losses. Health care added 34,000 jobs with the most growth in home health care services and hospitals. Professional and business services added 39,000 jobs, with the largest gains in professional, scientific, and technical services.

Employment in other major sectors, including manufacturing, transportation, warehousing and retail changed little between February and March.

Despite the economic head winds, employers – many of whom have struggled to fill openings –are continuing to hire or at least keep the workers they do have, even as business slows.

At Climax Packaging Machinery near Cincinnati, orders for drink-packaging machines and other industrial equipment are down about 40 percent from a year ago. But owner Daryll Rardon said it has become so difficult to find workers – especially welders, machine operators and electromechanical assemblers - that he’s holding on to his 26 employees and actively recruiting new ones.

“Am I hoarding workers? You could say I’m guilty of that,” he said. “If the right person walked in the door today, we’d hire them even though we don’t necessarily need them. That is not something I’ve ever done before.”

Employers’ propensity to hold on to workers even as the economy slows is “playing a very strong role” in supporting extra spending throughout the economy, according to Diane Swonk, chief economist at KPMG. The big question, she said, is just how long employers can justify keeping extra workers on their payrolls if there is a sustained drop in business.

“How long this ‘labor hoarding’ continues will test the resilience of the labor market,” Swonk said. “We just don’t know how much these patterns will shift: When will we go from hoarding to holding to cutting? How much are businesses willing to hold on to people even as demand wanes?”

The picture is being further complicated by the Federal Reserve’s aggressive efforts to tackle fast-rising prices. The central bank has raised interest rates eight times in the last year – most recently in March – in hopes that higher borrowing costs will slow the economy enough to bring down inflation. Policymakers continue to point to the strong but slowing job market as proof that their efforts are working without causing irreparable harm to the economy.

And while some of the country’s largest employers, including Walmart, McDonald’s, Microsoft and Amazon, are laying off thousands, the broader economy continues to add hundreds of thousands of jobs a month. Small businesses are making the bulk of those hires: 8 in 10 new hires in February were at companies with fewer than 250 employees, Labor Department data show.

Those small businesses, which struggled to compete with higher pay and better perks offered by large corporations for much of the pandemic, are reluctant to let workers go. But economists say that might not be sustainable long-term, especially as higher interest rates work their way through the economy.

“We’re seeing labor hoarding today, but I worry that these small businesses are also going to feel the biggest tightening of credit conditions,” Swonk said. “If these companies – especially younger firms – are blowing through cash and not getting access to credit lines they could’ve gotten a year ago, that could start to change the equation. How long can they afford to hold on to extra workers?”

Rardon, the business owner in Ohio, said new orders slowed precipitously early this year. Clients are still asking for quotes, but they are waiting weeks, sometimes months, to make a decision.

“People are getting nervous,” he said. “They’re worried what interest rates are going to do, what the economy is going to do. They are being really, really careful about how they spend their money.”

Although he would’ve ordinarily reacted by paring down staff – or at least pausing hiring –Rardon said that’s out of the question now. Instead, he’s boosting pay, offering $500 referral bonuses and providing free pizza, pasta and fried chicken on Fridays to keep his workers happy. (His biggest fear, he said, is losing them to General Electric, which has a manufacturing plant nearby. “They’re the 800-pound gorilla in our labor market,” he said.

“They can pay whatever

See Labor, Page A9 they want to pay if they need people.”)

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“It’s never been easy to get really good people, but it’s never been this hard,” he said. “People who, 10 years ago, I would’ve let go, are getting second and third chances now. It’s like, ‘Can you please shape up? We can’t lose you.’”

Indeed, by many measures, the labor market remains tighter than usual. The number of job openings and the rate of workers quitting their jobs was elevated well above pre-pandemic levels in February. The number of layoffs decreased slightly, despite downsizing at major companies. A backlog of consumer demand and a higher percentage of adults staying out of the workforce coming out of pandemic lockdowns has kept the labor market tighter than the Federal Reserve would like to ease inflation.

But in positive news for the Fed, the number of adults in the workforce rose by 480,000 workers in March. The unemployment rate drop in March reflects the increase of workers getting and looking for jobs. Coaxing Americans back to work after the pandemic has been a goal of policymakers looking to soften the labor market without triggering widespread layoffs.

In another bright spot, the Black unemployment rate fell to 5 percent in March, a record low. Black unemployment has long outpaced White unemployment in the United States.

There are also plenty of signs that the job market has softened substantially since last spring. Average hourly wages rose more slowly in March, by 0.3 percent, or to $33.18 an hour, lagging behind the pace of rising wages for much of 2022. Job growth, although historically high, continues to decline. There were 9.9 million job openings in February, down from 10.6 million in

January. Meanwhile, the share of job postings that advertise benefits such as health insurance, paid time off and retirement plans has begun to level off, according to data from the jobs site Indeed.

Many workers in industries facing labor shortages say understaffing has deteriorated working conditions and pushed people to quit.

Mayra Castaneda, 43, an ultrasound technologist at a hospital in Lynwood, Calif., said she’s seen many of her younger colleagues leave their jobs, cut back on hours, or switch industries because of difficult working conditions and the plentiful opportunities to earn higher starting wages in less stressful fast food and retail jobs.

“We’re severely understaffed. And if you don’t have enough staff to do the job, then patient care takes a hit,” Castaneda said. “Burnout and stress is the reality. You have to miss meals. You no longer have a relationship with your family.”

After 24 years in her job, Castaneda makes $60 an hour - much more than most of her colleagues. But she has still considered leaving her job because of the increasing burden and guilt that comes with caring for patients without adequate staff. “I’m hoping there’s some light at the end of the tunnel,” she said.