What happened in the March employment report

In March, employers added a net 431,000 jobs to payrolls, an expected downgrade from February’s figures influenced by the bounce back from the Omicron wave. Employment gains were led by leisure and hospitality, professional and business services, retail trade and manufacturing sectors. The headline unemployment rate dropped further, down to 3.6%, as the number of unemployed people declined to 6.0 million. Based on the latest job openings figures, from February, job openings remain plentiful at nearly 11.3 million, far outpacing the number of unemployed.

Job gains in March reinforce the idea that the job market is tight. This is good news for workers, but a growing concern for companies who are finding it challenging to attract and retain employees. Given this backdrop, I would expect earnings to increase, and indeed, hourly wages were up 5.6% and weekly wages up 4.6% from a year ago. While these wage gains outpace what has been typical of the last 40 years, they fall short of recent inflation, up 7.9% for the year ending in February.

The labor market is not yet fully recovered from its pre-pandemic level when it comes to job counts, as the number on payrolls remains 1.6 million or 1% shy of its February 2020 level, but the balance between those looking for a job and those looking to hire has largely recovered. Some sectors such as professional and business services, retail trade, construction, financial activities, and transportation and warehousing are fully recovered to February 2020 levels whereas jobs in leisure and hospitality, manufacturing, social assistance, and healthcare are down anywhere from 1% to 9% from their pre-pandemic totals.

What does today’s data mean for homebuyers and sellers and the housing market

A strong labor market along with a generational tidal wave of young people at prime household formation and homebuying years bodes well for housing activity this year. However, these tailwinds are confronting a housing market that still offers relatively few for-sale homes for buyers to choose from, generally resulting in fast sales and high prices. These challenges are going to be compounded by rising mortgage rates, which are pushing monthly mortgage payments higher for today’s homebuyers even as inflation means budgets are stretched on expenditures such as groceries and gas. Double-digit growth in rents will motivate many would-be buyers to keep their home searches going so that they can lock-in the bulk of their housing costs, but others may have to postpone searches, hoping instead that recently high construction figures continue to chip away at the 5.8 million home deficit and create buying opportunities down the road.