The economy in March continued its descent from dizzying heights, with employment growing at a healthy rate but one that nonetheless signifies employers are pulling back as steadily rising interest rates take their toll.
Employers added 236,000 jobs last month, the Labor Department reported, while the unemployment rate decreased to 3.5 percent, from 3.6 percent in February.
The year-over-year growth in average hourly earnings also slowed slightly in March, to 4.2 percent, a sign the Federal Reserve has been looking for as it seeks to quell inflation.
The range of industries beginning to fade has widened, as warehousing, retail, manufacturing, construction and financial activities — those more sensitive to borrowing costs — either lost jobs or stayed flat over the month.
“I think it’s very clear interest rates are starting to play a role,” said Michael Pugliese, an economist at Wells Fargo. “Some of it is just normalizing. You’re obviously not going to be able to sustain the job growth we’ve seen over the past year or two indefinitely.”
Other industries that had been growing swiftly, including hospitals, hotels and restaurants, slowed slightly. Overall, employers in leisure and hospitality remain 2.2 percent below their prepandemic staffing levels.
The March employment data was collected before two midsize banks failed and concerns arose about other institutions. That development is expected to tighten lending across the economy, potentially reducing smaller businesses’ ability to expand.
Other indicators in recent days have also provided evidence that the labor market is ebbing from its high-water marks. Job openings have decreased and businesses have mostly fulfilled the backlogged orders that kept them busy through the beginning of 2023.
Initial claims for unemployment insurance, for example, jumped in February, according to data released on Thursday, after the Labor Department revised the figures to better reflect seasonal factors. The numbers show a clear upward trend in new requests for jobless benefits in recent months. Those requests were remarkably low for the past few years.
Job openings dropped sharply in February, bringing the number of openings per available worker to a level that, while still elevated, is closer to the historical average. March surveys of both manufacturers and service-industry firms came in weaker than expected, with more employers starting to say that business is contracting rather than expanding.
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