U.S. unemployment drops to 3.6 pct in March amid tight labor market

U.S. employers have added 431,000 jobs in March as the Omicron-fuelled COVID-19 surge fades, with the unemployment rate dropping to 3.6 percent, the U.S. Labor Department reported on Friday.

Job growth was notably in leisure and hospitality, professional and business services, retail trade, and manufacturing, according to the report released by the department's Bureau of Labor Statistics (BLS).

"Higher wages, more consistent school schedules and inflation are all bringing workers in from the sidelines," Diane Swonk, chief economist at major accounting firm Grant Thornton, said in a recent blog.

Average hourly earnings for all employees on private nonfarm payrolls rose by 13 cents, or 0.4 percent, to 31.73 U.S. dollars in March, the BLS report showed. Over the past 12 months, average hourly earnings have increased by 5.6 percent.

A 0.4 percent rise in average hourly earnings would mark a reacceleration in wages from February but "lag overall inflation," Swonk noted.

Recent data from the labor market showed that the consumer price index in February rose 0.8 percent from the previous month, surging 7.9 percent from a year earlier, the largest 12-month hike in four decades.

Data from the Commerce Department released Thursday showed that core personal consumption expenditures (PCE), which excludes the volatile food and energy prices, jumped 0.4 percent in February, up 5.4 percent from the same period last year, also marking the biggest jump in nearly four decades.

The core PCE, the Federal Reserve's preferred inflation gauge, is well above the Fed's 2 percent target on inflation.

The BLS report showed that the unemployment rate dropped by 0.2 percentage point to 3.6 percent in March, after dropping by 0.2 percentage point in February. This measure was slightly above the pre-pandemic level of 3.5 percent.

It also showed that the labor force participation rate, at 62.4 percent, changed little in March, still one percentage point below the pre-pandemic level of 63.4 percent.

Swonk said the "largest hurdles" for those who haven't returned to the labor market since the pandemic remain child care and mobility, noting that "many no longer live where jobs are available and/or can't afford the commuting costs associated with expanding their search."

U.S. Federal Reserve Chairman Jerome Powell said last week that the labor market is "extremely tight," significantly tighter than the very strong job market just before the pandemic.