Key points:

  • The unemployment rate ticked down to 3.8% in March, alleviating concerns about a deteriorating labor market.
  • At the same time, payroll growth continues to be very strong, with employers adding 303,000 jobs over the month.
  • This strength appears to be enduring as wages continue to slow down and approach a strong but sustainable growth rate.

Today’s jobs report raises the possibility that rather than slowing down, job growth might be holding steady. And in fact, this strength is coming from sources that are more sustainable than those that fueled the burst of gains in 2021. March’s jobs numbers were uniformly strong, and upticks in the employment-population ratio — and labor force participation in particular — suggest that demand for workers is not outstripping supply like it was a few years back. Rather, while employer demand remains high, worker supply is rising to meet it, reversing some of the softening observed in the past few months. Clearly, the job market has plenty of gas in the tank in terms of demand, and room to run in terms of worker supply.

Beyond the top-line numbers, a few industries should grab some headlines. Construction had a notable uptick in job growth, growing at more than twice its pace from the past year, despite some recent loud calls that construction employment would suffer in the face of high interest rates. The large contribution from nonresidential specialty trade contractors points toward a possible explanation for construction’s resilience: Elevated factory construction activity spurred by recent federal policy. And let’s raise a glass to the Leisure and Hospitality sector, which was devastated by the pandemic, but has finally gained back all the jobs it lost since February 2020. 

The wage growth data in today’s report will make the Fed smile. The labor market continues to be resilient with the unemployment rate ticking back down, but wage growth continues to slow. The reduced pace of wage gains will alleviate some concerns of reignited inflation driven, in part, by the strong labor market. And while it has slowed, wage growth remains faster than the pace of inflation, insulating workers from undue harm. The labor market is strong, and that’s a good thing for all of us.