March Disappointment Understates Trend in a Tightening Labor Market

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U.S. employment increased by 98,000 jobs in March, down from an increase of 219,000 jobs in February. 

March’s surprisingly weak job growth is likely to cool the rising optimism in the U.S. economy. 98,000 new jobs is clearly disappointing, but should not be viewed as a sudden deterioration in the trend of employment growth. Rather, it is a fluctuation around a monthly trend of 150,000–200,000 added jobs, which is more than enough to continue to tighten the labor market. 

At 4.5%, the unemployment rate is back to 2007 levels. In such a tight labor market, it becomes harder and more expensive to fill job openings and maintain rapid job growth. Despite the unexpectedly low job growth in March, with its unemployment and inflation targets already being more or less met, the Fed is still likely to stay on its current normalization course of between two and three additional rate hikes in 2017.

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