Another month, another burst of better-than-expected job gains.

Employers added 303,000 jobs in March on a seasonally adjusted basis, the Labor Department reported Friday (Apr 5), and the unemployment rate fell to 3.8 per cent, from 3.9 per cent in February. Expectations of a recession among experts, once widespread, are now increasingly rare.

It was the 39th straight month of job growth. And employment levels are now more than 3 million greater than forecast by the nonpartisan Congressional Budget Office just before the pandemic shock.

The resilient data generally increased confidence among economists and market investors that the US economy has reached a healthy equilibrium in which a steady roll of commercial activity, growing employment and rising wages can coexist, despite the high interest rate levels of the last two years.

From late 2021 to early 2023, inflation was outstripping wage gains, but that also now appears to have firmly shifted, even as wage increases decelerate from their roaring rates of growth in 2022. Average hourly earnings for workers rose 0.3 per cent in March from the previous month and were up 4.1 per cent from March 2023.

“The vanishingly few areas to criticize this labor market are melting away,” said Andrew Flowers, chief labor economist at Appcast, a recruitment advertising firm.

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Some have worried that as the booming labor market recovery gave way to a milder expansion, job growth would mostly narrow to less cyclical sectors such as government hiring and health care. Gains in health care – including hospitals, nursing and residential care facilities, and outpatient services – led the way in this report. But job growth, for now, remains broad-based.

The private sector added 232,000 jobs overall. Construction added 39,000 jobs in March, about twice its average monthly gain in the past year. Employment in hospitality and leisure, which plunged during the pandemic, continues to bounce back and is now above its February 2020 levels.

The “continued vigor,” said Joe Davis, global chief economist at Vanguard, has come from “household balance sheets bolstered by pandemic-related fiscal policy and a virtuous cycle where job growth, wages and consumption fuel one another.”

President Joe Biden declared the report a “milestone,” noting that the economy has created 15 million jobs since he took office and began a set of programs meant to boost growth. “We’ve come a long way, but I won’t stop fighting for hardworking families,” he said in a statement.

Data analysts note that better-than-expected gains in business productivity and workforce participation have added fuel, too. Recent data from the Bureau of Economic Analysis shows corporate profits at a record high.

Officials at the Federal Reserve, which rapidly raised interest rates in 2022 and early 2023 to combat inflation, have expressed cautious optimism that they are approaching their goals of low unemployment and more stable prices.

Inflation has fallen drastically from its peak of 7.1 per cent, according to the Fed’s preferred measure. But it ticked up in February to 2.5 per cent, still a half-percentage point away from the Fed’s target. And some worry that rising oil prices or geopolitical chaos could upend the delicate state of affairs.

Reasons for caution go beyond global events.

Guy Berger, director of economic research at the Burning Glass Institute, which studies the labor market, noted that though layoff rates are near record lows, other data on hiring was “consistent with an unemployment rate just under 5 per cent” based on past business cycles.

And some labor economists believe that elevated borrowing costs for consumers and businesses, which were steered higher by the Fed, are poised to crack certain parts of the economy the longer businesses have to live with them.

Even as narratives about the US economy among top experts have waffled between jubilant relief and stubborn concern that the best of this business cycle was finished, in the aggregate the labor market has consistently been vibrant since 2022, almost uneventfully so.

But the underlying details do provide insights into potential shifts that may affect the mix of hiring and commercial activity going forward.

Employment growth in sectors such as professional and business services, finance and information remains soft. Daniel Zhao, lead economist at career site Glassdoor, pointed out that these three sectors collectively added just 10,000 jobs in March – a fresh indication of how white-collar employers have grown much more picky since their hiring spree during the pandemic.

“Companies are hiring selectively, prioritizing quality over quantity,” said Tom Gimbel, chief executive officer of the LaSalle Network, a Chicago-based staffing and recruiting firm.

The upside is that those workers are the most likely to be high earners in the first place; homeowners with low-cost, fixed-rate mortgages shielding them from rental inflation; and investors whose portfolios have been on a eye-popping bull run since fall.

Lower-wage earners, for their part, are experiencing a job market less hot than a couple of years ago, when switching jobs in search of better pay and benefits frequently garnered double-digit percent raises. The market is, however, still providing opportunities for earnings growth not seen since the late 1990s, according to key Fed measures.

In an interview with Bloomberg in March, Liz Everett Krisberg, the head of the Bank of America Institute, noted a crucial overarching reality for households: The monthly median value of savings and checking balances is more than 40 per cent higher than in 2019 for all income levels tracked by the bank.

Delinquencies are on the rise for subprime borrowers of cars and credit cards. But the overall percentage of household disposable income going to debt payments is still below its pre-pandemic low. NYT