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How did the employment picture change in the last month?


The hot U.S. job market is a little less hot. We got a temperature check from the Labor Department this morning which shows that employers added fewer workers in March than they did the month before. NPR's Scott Horsley is here. Scott, good morning.

SCOTT HORSLEY, BYLINE: Good morning, Steve.

INSKEEP: How much of a slowdown are we talking about?

HORSLEY: Employers added 236,000 jobs in March. That's down about 90,000 from February. We've seen a gradual deceleration since the start of the year, when we had that blockbuster month of hiring. But even with the slowdown, you know, 236,000 is still a pretty solid month for job growth. It's well above the average rate back in 2019, the year before the pandemic. And Nela Richardson, who's chief economist at the payroll processing company ADP, says, you know, some slowdown is not surprising in an economy that's already added well over 12 million jobs in the last couple of years.

NELA RICHARDSON: Given where we are in the jobs recovery, you would expect to see a lessening of job gains. I think the story is, yes, we're finally seeing that downshift.

HORSLEY: Keep in mind, the Federal Reserve has been trying to tap the brakes on the economy by raising interest rates as it tries to control inflation. And you can see the effect of those higher borrowing costs in today's report. Construction, for example, cut about 9,000 jobs last month. That's very interest-rate sensitive. And manufacturing businesses shed about 1,000 jobs.

INSKEEP: Well, given that, why would the Fed want to keep going in this direction?

HORSLEY: Yeah, it seems a little odd, right? Most people think the more jobs you add, the better. But the central bank is worried that the job market has been out of balance. That is, demand for workers is outstripping the number of people available to fill those jobs, and that's pushing up wages. Of course, rising wages are good for workers, but they also have the potential to push up prices, especially in labor-intensive industries like restaurants and auto repair shops. One way to restore balance would be to have more workers come into the job market. And we are seeing some of that - 480,000 people joined the workforce last month, which is very positive. But Wells Fargo economist Sarah House says the Fed would also welcome some slowdown in demand for workers.

SARAH HOUSE: It's uncomfortable when we see the labor market weakened, but given how vexing inflation has been over the past two years, if we want to get inflation under control, some softening in the labor market is necessary.

HORSLEY: Now, wage gains are slowing down. Average wages in March were 4.2% higher than a year ago. That's down from a 4.6% annual increase the month before.

INSKEEP: Is hiring affected at all by the big economic news of last month, the two big banks that failed?

HORSLEY: Yeah, that's not really evident in today's report, which measures employment right around the time that Silicon Valley and Signature Banks went under. But the fallout from those bank failures likely will have an impact in the job market in the months to come. You know, other banks have started to get stingier about making loans. That makes it harder and more expensive for businesses to borrow money. And as time goes on, House thinks that will be a drag on hiring.

HOUSE: Overall, you're going to see lenders get a little bit more conservative. We think it's going to contribute to a moderation in payroll growth in the coming months and probably, by the end of this year, looking at some outright job losses.

HORSLEY: Some forecasters are warning that it could be that credit tightening that tips the U.S. economy into a recession later this year. Of course, employers are keeping an eye on those recession concerns, and that's another reason they might be cautious about bringing on additional workers.

INSKEEP: NPR's Scott Horsley. Thanks, as always.

HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.

Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.
Steve Inskeep is a host of NPR's Morning Edition, as well as NPR's morning news podcast Up First.