March Jobs Report Commentary from MBA's Mike Fratantoni

The following is MBA SVP and Chief Economist Mike Fratantoni’s reaction to this morning’s U.S. Bureau of Labor Statistics report on employment conditions in March.  

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“Job growth slowed in March, and wage growth decelerated further, with average hourly earnings now up 4.2% over the past 12 months. These trends and recent data showing fewer job openings and increases in initial claims for unemployment insurance paint a picture of a job market that is still quite strong but beginning to flag, lagging other indicators of a slowing economic activity and tightening credit. On net, job growth for the first two months of the year was also revised down somewhat.

“The increase in employment is concentrated in just a few sectors, with the largest gains in leisure and hospitality, where the level of employment remains 2.2% below its pre-pandemic peak. The question becomes whether consumers will continue to spend on meals out and travel as the economy slows. If not, job gains in this sector may also begin to slow.

“The unemployment rate fell to 3.5% even as labor force participation increased a bit. The unemployment rates for teenagers and those with less than a high school diploma dropped by 1.3% and 1%, respectively – highlighting that much of the job growth is in lower paying jobs. MBA expects the unemployment rate will increase to 4.8% by the end of 2023.

“Slowing wage growth should allow inflation in the services to slow over time. MBA expects that the Federal Reserve has reached the peak for this rate cycle, and slowing job growth supports that call, but the most important data points will be those for inflation. If inflation does not show signs of also slowing, the Fed may move ahead with one last rate hike.”