The United States’ economic recovery slowed in March 2023, with employers adding 236,000 jobs, according to the Labor Department. This figure is fewer than February’s job additions but in line with analysts’ expectations. However, the unemployment rate remains low at 3.5%, close to historic lows. Despite higher borrowing costs, the US economy has been resilient, with employers adding more than 330,000 jobs monthly on average over the past six months.
The US Federal Reserve’s recent raising of interest rates aims to stabilize soaring prices. Nonetheless, raising rates makes borrowing more expensive, and businesses may borrow less, making them less likely to create jobs or even cut staff. However, despite the concerns, the US labor market has defied expectations of a slowdown so far.
Analysts have said that the latest report from the US Labor Department suggests conditions may be starting to change, pointing to job declines in the construction, manufacturing, and retail sectors. The increase in wages also eased, with average hourly earnings rising by 4.2% over the year to March, below the 4.6% increase in February and the lowest since mid-2021.
Big companies, including consultancy Accenture, entertainment giant Disney, and fast-food chain McDonald’s, have announced job cuts in recent weeks. But bars, restaurants, schools, and hospitals have continued to add workers, raising hopes that the economy will slow, and inflation will subside without a painful recession.
US inflation, which is the rate at which prices rise, hit 6% in February. That has fallen from more than 9% last June but remains far higher than the Federal Reserve’s 2% target. The Federal Reserve, along with many other central banks globally, has been lifting interest rates to cool the rate of price rises. Since March last year, the bank has raised interest rates nine times, including last month when the US banking sector was hit by its two biggest failures since the global financial crisis in 2008.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said the March jobs report was the “calm before the slump.” He predicted hiring would fall sharply as bank lending slows following the collapse of Silicon Valley Bank (SVB) and Signature Bank. “The March data effectively are a look back into the pre-SVB world,” he said. “But the hit from tighter credit conditions is coming. We expect unemployment to rise markedly across the remainder of this year.”
Jerome Powell, the chairman of the Federal Reserve, has faced increasing pressure from some politicians who say the bank is taking steps that could force companies to make major job cuts. Commenting on last month’s increase, Mr. Powell pointed to the strong jobs market and said he remained hopeful that officials could achieve a so-called soft landing. This means an economy avoids a recession or if there is a slowdown, it will be short-lived. “I think that pathway still exists and, you know, we’re certainly trying to find it,” he said.
