Job gains will likely continue into the month of March, following three months of unexpectedly strong gains despite high interest rates from the Federal Reserve.
The US Bureau of Labor Statistics releases its monthly Employment Situation Summary on Friday. Economists expect a job gain of around 213,000 and a 3.8 percent unemployment rate, according to Bloomberg.
Most industries are continuing to add jobs despite the high interest rates, a sign of a still strong economy, as companies are still hiring to meet consumer demand. Around 275,000 jobs were added in February, which came as a surprise to many economists, who had predicted around 200,000, according to the BLS. January saw an additional 229,000 jobs; while December closed out 2023 with around 290,000.
This jobs report will come amid uncertainty regarding whether the Fed will hold or cut interest rates in July. Rates have remained around 5.25 and 5.5 percent since last August, the highest it has been in nearly two decades, as the central bank tries to reduce inflation. The report will play a key role in determining whether high interest rates are beginning to slow the economy.
The unemployment rate is perhaps the most important factor to watch. Most economists expect it to fall from 3.9 percent, as reported in February, to 3.8 percent. But if it does rise past 4 percent, it will be the highest it has been since February 2022. A rise in the unemployment rate combined with slowing job gains would mean that people are not finding jobs as easily. That could lead consumers to pull back on purchases, making it more likely that the Fed cuts interest rates.
Immigration has also affected unemployment rates as more immigrants enter the job market. It has also led to higher work force participation as they replace people over 65 who are beginning to retire. This eases the tight supply of labor, leading to more job growth without high inflation from wage growth, according to Guy Berger, director of economic research at the Burning Glass Institute.
“[Immigration] allows for us to be in a weird spot where wage growth is moderated,” Berger said. “Monthly jobs numbers look great; at the same time, the numbers and measure of slack in the labor market have actually gotten cooler.”
In terms of wage growth, March’s average hourly earnings will also help determine the strength of the job market and whether the Fed will cut interest rates. Earnings for all employees increased by five cents in February, lower than the 18-cent increase from December to January. Strong wage growth is positive on an individual basis, but wage hikes are sometimes passed on to the consumer, leading to an increase in inflation and thus adding more pressure to the Federal Reserve’s 2 percent target.
In February, healthcare, government and leisure/hospitality saw the largest gains in employment. Healthcare saw an above average gain of 67,000, while government and leisure/hospitality saw gains in line with average increases in previous months, according to the BLS.
While there is some concern that concentrated growth in these three areas is simply a sign of those industry-specific rebounding rather than broad economic strength, Berger said that is not the case here.
“There’s a long-run demand for healthcare workers,” Berger said. “So the fact that this sector is holding on to adding jobs at a solid pace is reassuring about the long term and medium-term resilience of the job market for the next three days, and even the fall months and possibly beyond.”
Julia Pollak, chief economist for ZipRecruiter, said that while healthcare and other industries that struggled during the pandemic are having a turnaround, other industries are still holding fast.
“The losers are recovering, and the winners are remarkably resilient,” Pollak said.
