What's going on?
Data released on Friday showed that the US economy added 196,000 jobs in March – more than expected, and a rebound from last month’s surprisingly small number of new jobs.
What does this mean?
Most of the new jobs were added in healthcare and in professional and technical services (e.g. accountants and engineers) – as well as in construction, perhaps thanks to homebuilders’ rising sales expectations. The biggest job losses were in manufacturing, despite higher activity last month – and in retail, which maybe pared back jobs in anticipation of fewer shoppers this year.
Average wages were 3.2% higher than a year ago – below forecasts and lower than in recent months. The slowdown could be partly explained by more technical workers being hired in March while retail jobs fell: minimum wage hikes from Amazon, Walmart, and now Target would’ve helped boost wage growth previously.
Why should I care?
For markets: Investors’ jobs were buying stocks.
Investors bought up riskier stocks around the world on Friday and sold off safer US government bonds, perhaps to make room. A recovery in US job growth (March’s number of new jobs was nearly six times as many as February’s revised figure) despite snow disruption – without which jobs numbers might’ve been higher, according to Pantheon Macroeconomics – suggests the US economy is still strong. And slower-than-expected wage growth likely means less pressure on the US central bank to raise interest rates anytime soon – another likely reason for investors snapping up stocks.
The bigger picture: Something’s got to give.
The unemployment rate in March was steady at 3.8%, despite fewer people declaring themselves available to work. And last quarter, employers actually cut 36% more jobs than a year ago – the most in a single quarter since 2015. Labor shortages typically cause wage increases (cha-ching!). But eventually a lack of available workers can act as a bottleneck, slowing down companies’ ability to invest in meeting demand – and leading to lower economic growth.