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March's jobs report is a sign the Fed's efforts to curb inflation are working

MARY LOUISE KELLY, HOST:

The high-flying U.S. job market lost a little altitude last month, but forecasters say there is still a chance for a soft landing. The Labor Department said today that employers added 236,000 jobs in March, fewer than the month before. But the unemployment rate remains low - in fact, very low - and unemployment among African Americans dropped to its lowest rate on record. NPR's Scott Horsley is here to explain all. Hey, Scott.

SCOTT HORSLEY, BYLINE: Hi, Mary Louise.

KELLY: Hey. So we keep hearing all about layoffs, including, unfortunately, at NPR. But it seems like a lot of other employers are hiring. So what's going on here?

HORSLEY: Yeah. We are still seeing a lot of job growth, especially in service-oriented businesses like restaurants and entertainment. Even the tech sector, where a lot of those layoff announcements have come from, actually added a few thousand jobs on net last month. Overall, the pace of hiring was down from February. But University of Michigan economist Betsey Stevenson says this is a job market that is slowing down, not stalling out.

BETSEY STEVENSON: This report is just about as good as it can be. It's slowing slightly, and wage growth is slowing slightly, which is exactly what the Fed wants to see - is they're trying to tap the brakes on the economy without crashing the car.

HORSLEY: The Federal Reserve has been raising interest rates in an effort to slow the economy and get inflation under control, but it's trying not to tip the economy into recession. That's the so-called soft landing you mentioned. From that perspective, this is an encouraging report. Wage gains, which the Fed's been watching closely, have eased in recent months, and that should take a little pressure off inflation.

STEVENSON: All right. Tell me more about the unemployment headline I mentioned. What's happening there?

HORSLEY: Yeah. The unemployment rate ticked down just a bit to 3.5%. That's encouraging because, at the same time we saw a big influx of new workers - nearly half a million people came off the sidelines and joined the workforce in March - the African American unemployment rate dropped all the way down to 5%, which is the lowest since the government started tracking it back in 1972. Now, that sample size is fairly small, so the numbers could bounce up and down a lot. But Stevenson says there are other encouraging signs here. For example, the share of African Americans who are in the workforce is now higher than it was before the pandemic, unlike the share of whites in the workforce, which has still not fully recovered.

STEVENSON: African Americans just pour back into the labor market, and there's a lot of jobs out there. They're looking for them, and they're taking them.

HORSLEY: The Latino unemployment rate was also down last month to 4.6%.

KELLY: All right. So that sounds like a fair bit of good news. Is there bad news in today's report?

HORSLEY: You definitely see the fallout from those rising interest rates in sensitive sectors like construction and manufacturing. Construction companies cut 9,000 jobs last month. Factories cut about 1,000. We've kind of been expecting that. A monthly survey of factory managers has shown declining orders for seven months in a row. And Tim Fiore, who conducts that survey, says managers had been keeping workers on the payroll in anticipation of a rapid rebound. But now they're not so sure.

TIM FIORE: Companies appear to be much more willing to reduce their headcounts, which - the only reason they would be wanting to do that is that they're not really sure about demands two to three to four to five months out.

HORSLEY: The question now is whether those factory job cuts last month will be limited to the manufacturing sector or if they're a signal of what's to come for the broader economy.

KELLY: Thank you, Scott.

HORSLEY: You're welcome.

KELLY: NPR's Scott Horsley. 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.