The U.S. economy added far fewer jobs in March, marking its weakest pace of job growth since 2013. Now, economists are debating whether the recent slowdown signals the end of a robust period of job creation as unemployment inches closer to a 5 percent rate.
U.S. employers added 126,000 jobs in March, down sharply from economists’ expectations of net job growth of 250,000 last month, according to analysts polled by Thomson Reuters. March’s figures also fell far below the average 269,000 jobs added over the previous 12 months.
The unemployment rate remained unchanged at 5.5 percent, the Labor Department said Friday. The U.S. had previously added at least 200,000 jobs per month for 12 consecutive months following February’s strong jobs report, a feat not seen in 20 years.
The sharp gains in job creation in recent months are unlikely to continue, however, since they reflect “a recovery, not a standard,” says Tara Sinclair, chief economist at Indeed. “Once we hit full employment, we’re going to drop well below what we’ve gotten used to in the last year.”
The Federal Reserve forecasts that unemployment will fall to between 5 percent and 5.2 percent this year, a level that traditionally triggers wage growth and inflationary concerns. The debate over full employment matters because the U.S. Federal Reserve has a dual mandate of maintaining price stability and achieving full employment. Once the unemployment rare nears 5 percent, the Fed is increasingly likely to normalize monetary policy by raising interest rates.
Historically, economists say the U.S. economy hits full employment when the jobless rate dips between 5 percent and 4.5 percent. But in the aftermath of the most recent economic recovery, economists disagree about the point at which job growth is likely to slow. Many Americans who work part-time jobs want to work full time, and nearly two-thirds of people who are able to work have dropped out of the labor force—the highest portion opting out of work since the 1970s. The labor-force participation rate was little changed last month at 62.7 percent.
“Although we had the best job creation last year since 1999, most people aren’t ready yet to throw in the towel and say we’re at full unemployment,” said Mark Hamrick, Washington bureau chief at Bankrate.com.
The number of Americans who have been out of work for 27 weeks or longer was essentially unchanged last month, at 2.6 million, or 29.8 percent of the unemployed. The average hourly earnings for private-sector workers rose by 7 cents to $24.86. For most workers, however, real wages have fallen or remained flat for more than three decades.
But there is something more substantial, something different with this report than with other employment reports recently, says Hamrick, as four main areas damped job creation in March: Harsh winter weather, a strong U.S. dollar, lingering effects from the West Coast ports labor dispute and lower energy and commodity prices.
A strong dollar is beginning to show signs of negative effects on U.S. employment, as job creation in March saw a sharp decline in manufacturing jobs, with imports rising and exports slowing.
America's manufacturing sector lost 1,000 jobs in March, the Department of Labor said Friday, continuing a decades-long slide. Manufacturing accounts for roughly 8 percent of U.S. jobs today, down from about a third of all jobs in the early 1970s.
Meanwhile, there was a decline in mining last month, weighed down by low oil and gas extraction and a drop in commodity prices.
“These near term transitory factors may continue to linger because the strong dollar and low oil prices are likely going to be with us for a while,” Hamrick said.