US hiring slowed in March but remained robust, with gains in service-providing businesses like bars and restaurants, but weakness in construction and manufacturing, according to the Bureau of Labor Statistics’ report. Leisure and hospitality fuelled last month’s growth in payrolls, with government employers and the professional and business services industry also hiring at a solid clip, but there was employment shrinkage in construction, manufacturing, and nondurable goods. However, government employers added 47,000 jobs in March led by hiring from state and local governments who typically struggle to add workers in a tight labor market. Health care businesses also added 34,000 jobs and employment in the business services sector grew by 39,000.
The construction industry lost 9,000 jobs in March, the first decline in construction employment in more than a year and the largest job loss in the sector since May 2021 -— though still a drop of just under 1.1%. Demand for housing tanked at the end of last year when aggressive rate hikes from the Federal Reserve pushed up borrowing costs for home buyers. Manufacturing, which is one of the most interest-rate sensitive industries, lost jobs last month. Data from the Institute for Supply Management released this week showed that the manufacturing sector contracted in March for the fifth month in a row.
The nondurable goods industry also saw a pullback in hiring, which was likely due to weaker consumer demand for clothes and household products. Temporary jobs also declined by nearly 11,000 in March, which could be an indicator that the labor market is going to soften further in the coming months. “If you start to see a reduction in temporary hires, that usually means that businesses are seeing some softness in the revenue stream, which is one of the first signs of an easing in the jobs market,” according to Beth Ann Bovino, US chief economist at S&P Global.
However, “the gains we continue to see in health care and leisure and hospitality are because those industries are still trying to recoup earlier losses,” said Diane Swonk, chief economist at KPMG. Nonetheless, she added that “the services sector held up but showed some signs of cooling”. While new residential construction has slowed over the past year, construction jobs have held up, mostly because of a backlog in construction projects, Swonk said. Nonetheless, she added that the March decline in construction employment is attributed to weak demand for housing and “unusually harsh spring weather”.