U.S. Economy Adds 303,000 Jobs, Unemployment Rate Falls to 3.81 TP3T in March, Labor Market Continues to Outperform

The U.S. economy added more jobs than expected in March, and the unemployment rate fell, underscoring the fact that the labor market is stronger than many economists had predicted.

The U.S. Bureau of Labor Statistics released data on Friday showed that the labor market in March added 303,000 non-profit jobs, much higher than economists expected 214,000. Meanwhile, the unemployment rate fell to 3.81 TP3T from 3.91 TP3T in February.

Meanwhile, wages, a key indicator of inflationary pressures, rose by 4.1% year-on-year, the lowest annual increase since June 2021, while wages rose by 0.3% month-on-month, up from 0.2% in the previous month. On a monthly basis, wages rose by 0.3%, up from 0.2% in the previous month.

The report comes at a time when investors are watching for signs of cooling in the labor market, while hoping to The Fed's chief executive, Jerome Powell, is currently proposing a basic program of three rate cuts later this year. After two months of strong job growth, Powell called the labor market "strong but coming back into balance" in an obituary speech at Stanford University on Thursday.

A healthy job market has long been recognized as the key to avoiding a recession, while the Fed has kept interest rates limited to help fight inflation.

"The strong and broad-based pace of job creation in March exceeded all expectations, underscoring the fact that the Fed will not be in a hurry to start cutting rates," Nationwide Premier Economist Kathy Bostjancic wrote in a note to clients. " However, as Matteo Powell said, strong employment growth does not preclude an easing of monetary policy, as it partly reflects an increase in the labor supply."

In response to Bostitch's observations, the labor force participation rate rose to 62.71 TP3T from 62.51 TP3T previously, and the average workweek rose to 34.4 hours from 34.3 hours.

In Friday's report, the health care sector saw the largest increase in employment, with a gain of 72,000 jobs in March. Meanwhile, government employment increased by 71,000 jobs. The construction sector added 39,000 jobs, double the average monthly gain over the past 12 months.

In total, other data released this week reflected the continued vitality of the labor market. The latest Job Openings and Labor Turnover Survey (JOLTS), released Tuesday, showed that both job openings and hiring rose slightly in February. Meanwhile, ADP's latest private employment data showed that 185,000 private jobs were added in March, up from 155,000 in February.

"February's Job Openings and Labor Turnover Survey is consistent with the labor market remaining relatively healthy," Oxford Economics Matrix U.S. economist Nancy Vanden Houten wrote in a note to clients on Tuesday. The February survey of job openings and labor turnover is consistent with the labor market remaining healthy where it is.

Recent labor market data paint a picture of a strong economy that, for now, appears to be able to withstand higher interest rates while the Fed waits for inflation to fall further. Investors' bets on when the Fed will cut rates have changed slightly since the report was released. According to the CME FedWatch Tool, investors now see a 55% probability of a Fed rate cut in June, down from 60% a week ago.

"The sharp increase of 303,000 in non-employment in March supports the Fed's position that the economy's tensile strength means the Fed can take its time and start cutting interest rates now," wrote Paul Ashworth, head of North American Economics at Capital Economics, in a note to clients. Means the Fed can take its time, and now may not start cutting rates until later this year.

Josh Schafer is a reporter for Yahoo Finance. Please.Follow him on X. RT @_joshschafer.

Click here to view the latest stock market news and in-depth analysis, including events affecting the stock market.

Read the latest financial news from Yahoo!