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CNN
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US employers added just 236,000 jobs in March, coming in below expectations and indicating that the labor market is cooling off amid the Federal Reserve’s yearlong rate-hiking campaign to chill inflation.

The unemployment rate dropped to 3.5%, according to the March jobs report released Friday by the Bureau of Labor Statistics.

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.

While the US labor market has kept trucking along despite other areas of the economy slowing under the weight of interest rate hikes, it is showing some signs of cooling.

“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, Glassdoor’s lead economist, in a statement. “The labor market is still strong, but it’s gliding slowly back down to Earth.”

March’s total is a notable reduction from February’s upwardly revised 326,000 jobs gained and January’s monster jobs number — originally 517,000 but subsequently revised down to 472,000.

The 236,000 jobs added during March is the smallest monthly gain since a decline in December 2020. Excluding the losses seen during the first year of the pandemic, it’s the smallest monthly jobs gain since December 2019.

Industries such as leisure and hospitality, health care and government continued to lead the way in job gains. Industries reporting monthly losses included retail trade, temporary help, manufacturing, construction and information services.

The Fed wants to see more slack in the labor market: As the economy recovers from the pandemic, the demand for workers has far exceeded the supply, contributing to higher wages and inflationary pressures.

Contributing to the tightness has been a smaller-than-expected labor force and participation rates that were slow to match projections or meet pre-pandemic levels.

During the past two and half years, a lot of ink has been spilled on the question of why workers were “missing,” with recent research zeroing in on Covid-19 deaths, reduced immigration, aging population and long Covid as the primary culprits.

Workers are now filing back into the labor market.

In February, the labor force participation rate for workers between the ages of 25 and 54 hit 83.2%, surpassing pre-pandemic levels. And last month, the overall labor force participation rate continued its upward march, increasing to 62.6% and matching a pandemic-era high. But that’s still below the February 2020 rate of 63.3%.

Average hourly earnings grew 0.3% from the month before, a slight uptick from the 0.2% seen in February. On an annual basis, earnings increases moderated to 4.2% from 4.6% the month before.

The average workweek inched down to 34.4 from 34.5 hours.

“The labor market continues to remain resilient and is a pillar of strength,” said Zhao. “The Fed is looking for balance from the labor market, and today’s report is a step in the right direction.”

This story is developing and will be updated.