The March jobs report showed hiring slowed last month but likely not by enough to ease pressure on the Federal Reserve to raise interest rates in its efforts to slow inflation.
The U.S. economy added 236,000 jobs in March while the unemployment rate fell to 3.5%, data from the Bureau of Labor Statistics released Friday showed.
Here are the key figures from the report, compared to last month's revised numbers:
Nonfarm payrolls: +236,000 vs. +326,000
Unemployment rate: 3.5% vs. 3.6%
Average hourly earnings, month-over-month: +0.3% vs. +0.2%
Average hourly earnings, year-over-year: +4.2% vs. +4.6%
By industry, leisure and hospitality was again the largest contributor to last month's job gains with 72,000 new workers coming into the sector during March. Temporary help services was the second-largest contributor to job growth last month with 65,000 workers joining the sector.
The labor force participation rate also ticked higher in March, rising to 62.6% from 62.5% in February. Average weekly hours worked fell slightly to 34.4 from 34.5.
Over the last six months the U.S. economy has added an average of 334,000 jobs each month.
Following Friday's release, markets are now pricing in a 67% chance the Federal Reserve raises rates by another 0.25% in May, up from 50/50 odds of a hike on Thursday ahead of the numbers, according to data from the CME Group.
Forecasts from the central bank released last month suggested one additional 0.25% rate increase was likely this year.
Still, economists see March's jobs data as beginning a period of slower growth for the U.S. labor market that will eventually result in a rise in the unemployment rate.
"The 236,000 gain in non-farm payrolls in March adds to the evidence that the economy's strong start to the year was partly a weather-related blip, with momentum now fading again," wrote Andrew Hunter, deputy chief U.S. economist at Capital Economics, in a note on Friday.
"With the sharp fall in job openings and upward trend in jobless claims also pointing to a cooling in labour demand, and the drag from the recent banking turmoil still to feed through, we expect employment growth to slow more sharply soon."
The Fed expects unemployment to rise to 4.5% by the end of this year.
Earlier this week, data on initial jobless claims out Thursday and private payroll data from ADP out Wednesday suggested the labor market is cooling.
A slowdown in wage growth — from 4.6% over the prior year in February to 4.2% in March — served as another sign in Friday's report some labor market pressures are easing.
Initial claims are seen as the best real-time indicator of stress in the labor market; this measure has shown some signs of increasing in the last few months, with claims totaling 228,000 last week. ADP's report out Wednesday morning showed there were 145,000 jobs added to the private sector last month, below expectations.
Additionally, job openings data for February showed open roles in the economy continue to fall, another potential signal the labor market is slowing. February marked the first time since June 2021 there were fewer than 10 million jobs open as of the end of the month.
"Despite weakening in employment readings in the run-up to the non-farm employment report, employment growth has not yet collapsed though there are visible signs of continued moderation," wrote Nationwide chief economist Kathy Bostjancic in a note on Friday.
"In all the Federal Reserve will be pleased by the details of the employment report, but still is supportive of another rate hike in May — which we think could be the last for the tightening cycle. Followed by a long pause."