The latest government data released Friday morning puts the brakes on what had been the most rapid period of sustained job growth in two decades. It also could influence the Federal Reserve to push back the timing of an interest rate hike planned for later this year.
Not since December 2013 has the nation created fewer jobs in a month. March’s data, released by the Department of Labor, ends a 12-month streak in which the U.S. economy had added at least 200,000 positions. Economists polled by Bloomberg had expected employers to have added 245,000 jobs in March.
Wage growth continued to be modest, with average hourly earnings up seven cents from the previous month and up 2.1 percent from last year. In addition, job growth for January and February was revised downward by a combined 69,000 positions.
“The economy is hitting some speed bumps,” said Perc Pineda, a senior economist at Credit Union National Association.
Stock markets are closed for the Good Friday holiday.
The latest numbers act as something of a course correction, putting the labor market more in line with an economy that is going through a slow patch after a period of rapid expansion in mid-2014.
A nasty winter kept some consumers indoors, while the appreciating dollar has trimmed the profits of exporters and could ultimately undercut their hiring plans. Earlier this week, the Federal Reserve Bank of Atlanta, which maintains a rolling gross domestic product estimate, said growth in the first quarter was forecast to be zero percent.
“GDP is now matching employment,” said Bill Spriggs, the AFL-CIO’s chief economist. “If GDP is going to flatten out, so is employment.”
The monthly jobs report is a closely watched gauge for the direction of the economy, and some analysts cautioned that March’s numbers could prove anomalous. Taking a broader view, the economy still appears far healthier than it did earlier in the recovery. Over the last year the nation has added 3.1 million jobs, and the unemployment rate has fallen from 6.6 percent. Part of the recent slowdown has stemmed from temporary factors, including weather and a dockworkers dispute that caused a logjam at West Coast ports.
“When we have had those good months, I never unfurled the ‘mission accomplished’ sign,” Department of Labor Secretary Thomas E. Perez said in a phone interview. “And when we have months not in line with expectations, I don’t get hangdog. I’m looking at the overall trend data.”
Some industries took a step backward in March. The mining, construction and manufacturing sectors — all of which grew reliably in 2014 — shed jobs. Retail and health jobs remained strong, as did those in what the government calls the professional and business services industry (think accountants and engineers).
Wages have proved to be the most stubborn part of the recovery. Annual wage growth has hovered around 2 percent throughout the recovery, below historic levels, even as more people have entered the workplace. Economists have been hoping an expanding workforce would raise pressure on companies to fight for employees and boost pay. But so far, that has not happened, in what analysts say is a clear sign that the U.S. job market hasn’t reached its full potential.
In March, the average hourly worker received $24.86, up from $24.79 in from the previous month. But that was offset by another factor: The average hourly work week declined by 0.1 hours.
In a speech last week, Federal Reserve chair Janet Yellen said that labor market conditions will likely “improve further” in coming months, and she called the overall jobs recovery “substantial.” One year ago, the unemployment rate was 6.6 percent. Five years ago, it was 9.9 percent.
However, all this has been achieved in an unprecedented environment, one in which interest rates have stayed near zero. If the central bank soon raises the so-called federal fund rate back to what it considers a “normal” level, it’s unclear whether the investment and hiring will skid.
Yellen has tried to brace markets for the eventual hike, saying that the interest rate will be nudged up gradually, with room for changes in either direction. “The actual path of policy will evolve as economic conditions evolve,” Yellen said, “and policy tightening could speed up, slow down, pause, or even reverse course depending on actual and expected developments in real activity and inflation.”