March jobs numbers point to healthy but not-too-hot economy

• Employers are adding jobs at a healthy but more moderate pace. New workers are reentering the labor force in strong numbers, helping meet the demand for staff. As a result, wage gains are normalizing in a way that's consistent with the Federal Reserve's inflation target.
• If sustained, this "not-too-hot, not-too-cold" labor market could lead to an economy that resembles more the environment of 2019 (healthy job market with steady job growth and low inflation) than the strange hothouse of 2021 and 2022.

By the numbers: Payrolls rose by 236,000 last month, more than needed to keep up with labor force growth but well below the breakneck pace of hiring.

• Jobs growth averaged 345,000 a month in the first quarter of 2023, compared to 561,000 in the same period last year.

The intrigue: The Fed has been looking for the labor force to come back into balance, helping put a lid on wage growth and inflationary pressure. That can happen in two ways: cooler demand from employers or more workers looking for jobs.

• After a stubborn stretch, officials had all but given up on more help from the supply side.
• But for yet another month, workers came off the sidelines. Last month, the labor force grew by 480,000 workers — that is, about half a million more Americans either got a job or were looking for one. That's on top of the roughly 419,000 who did so in February.

Where it stands: Those developments may be helping put a lid on wage growth. Average hourly earnings have risen at a 3.2% annualized pace in the past three months — a rate entirely consistent with inflation settling near the Fed's 2% target.

• As recently as the fourth quarter of 2022, wages grew at a 4.9% annual rate.

Yes, but: A slew of other data — including next week's March inflation report — is due before the Fed's next policy meeting on Wednesday. The central bank will be reluctant to back off its campaign to raise interest rates until there's clear evidence inflation is coming down.

• Yields on two-year Treasury securities rose sharply Friday on the jobs news, reflecting a sense that the continued robust job market implies tighter money.

What to watch: The March jobs report does not reflect any weakness that may (or may not) result from the jolt to the financial system from recent bank failures. The surveys used to compile the report were conducted just as those developments were underway.

From the "you-absolutely-love-to-see-it" files, Friday morning's jobs numbers contained two new milestones that affirm a labor market that's in quite a good place, despite a year of recession murmurs.

First up, the unemployment rate among Black workers fell to 5%, from 5.7%, the lowest it has been in data that reaches back to 1972.

• The gap between the Black unemployment and the overall rates also fell to an all-time low of 1.5 percentage points, below the previous low of 1.6 in 2019.
• As we noted earlier in the week, a tight labor market is leading to more opportunities for disadvantaged groups, and the gap in the share of the population working between racial groups has narrowed.

There was also good news on the share of Americans in their prime working years who are employed. The share of 25 to 54 year olds working rose to 80.7%, from 80.5%.

• That surpasses the employment-to-population ratio for this age bracket reached in either of the last two expansions.
• It was last higher in May 2001, confounding the "people just don't want to work these days" narrative many employers have embraced as they faced recruitment challenges.