The U.S. labor market, easily one of the strongest elements in the national economy over the past year, may be gradually slowing down. Total nonfarm payroll employment rose by 236,000 in March, and the unemployment rate changed little at 3.5 percent, the U.S. Bureau of Labor Statistics reported on Friday.
Employment continued to trend up in leisure and hospitality, government, professional and business services, and health care, according to the Department of Labor report.
Economists were expecting a net gain of 239,000 jobs for the month and a jobless rate of 3.6%, according to Refinitiv. This is the first jobs report in 12 months that came in below expectations.
However, while the job count declined from the prior month, the March report was still strong overall.
And while consumer confidence in the housing market bounced back, it remained near historic lows, which suggests that the market will likely see a more gradual recovery as it enters the spring homebuying season, according to a report from the California Association of Realtors (CAR).
“The labor market in March came in like a lion with a banking crisis and more layoffs, and is going out like a lamb with a solid jobs report,” said Daniel Zhao, lead economist at Glassdoor.com, in a statement. “The labor market is still strong, but it’s gliding slowly back down to Earth.”
Wages inched up from a year ago at the slowest pace in 20 months, and labor force participation rose to the highest level since March 2020, while the unemployment rate dropped to 3.5%. The jobs report, while delivering some good news on the inflation front, could be just enough to prompt the Fed to raise the fed funds rate by an additional 25 bps in their next meeting in May.
With home prices softening and rates declining in recent weeks, said CAR, buyers’ purchasing power should continue to improve and will likely bring more buyers back into the market.
However, despite the relatively strong labor market, consumer confidence in the housing market remains near historic lows, according to the CAR report. After dipping briefly in February following a streak of three consecutive monthly increases, the Fannie Mae Home Purchase Sentiment Index® (HPSI) bounced back by 3.3 points in March.
The monthly uptick pushed the headline index to 61.3 and 11.9 points closer to the year-ago level. While four of the six components of the index – including perspective on home-selling conditions and consumers’ sense of job security – showed noticeable improvements month-over-month, a large majority of consumers continue to believe that it is a bad time to buy a home.
According to the Mortgage Bankers Association’s (MBA) Market Composite Index, mortgage application volume decreased 4.1% on a seasonally adjusted basis and 4.0% unadjusted during the week ended March 31, compared to the week ended March 24. Applications for both home purchases and refinancing dipped after increasing for four consecutive weeks, despite mortgage rates trending lower.
Low inventory of homes for sale, however, said the CAR report, will continue to be a challenge as the traditional spring homebuying season begins.
