Here we go again? Another spring is here and suddenly the economic data is looking weak again. Private-sector nonfarm payrolls rose in March by a slim 121,000 on a seasonally adjusted basis. That’s roughly half as strong as we’ve been seeing in recent months. In February, for instance, private job growth was a much stronger 233,000. It’s safe to say that today’s number is a big disappointment and far below what most economists were expecting. Today’s jobs report also raises new concerns that the economy is weaker than it appeared in recent months, giving new strength to the arguments that the warm winter has been artificially juicing the numbers.
The unemployment rate still managed to slip a bit to 8.2% last month from February’s 8.3%. But this is meaningless in context with the latest evidence of weak job growth. In any case, it’s suddenly a whole new ballgame for analyzing the economic outlook… again.
One reading of today’s report is that economic momentum generally is slowing. Indeed, the main reason for the weak jobs report is due to a reversal of fortunes in the services sector, which dominates the labor market in providing jobs. Consider that in February, services jobs rose by a seasonally adjusted 204,000, or roughly in line with the previous two months. But growth in services jobs slowed to a net rise of just 90,000 in March.
If the economy is destined for another slowdown or worse, it’s hardly a total surprise, given the ongoing downshift in the annual growth rate of personal income. Yesterday I wondered if ADP’s estimate of job growth would suffice to overcome this headwind and the question certainly resonates on a deeper level after today’s news.
Even so, it’s premature to say that economic expansion has run its course. The risk may be higher today, but a stronger argument for what happens next requires more data. Monthly payrolls numbers can and do bounce around a lot, even in far more robust periods of economic growth. March’s payrolls update might reflect a temporary bit of statistical noise. One reason for favoring this view is yesterday’s weekly update of initial jobless claims, which continue to trend lower. The ongoing fall in new filings for jobless benefits doesn’t jibe with today’s payrolls report, but it’ll take time to figure out which series is the superior barometer for what’s coming. For the moment, the weekly claims numbers deserve the benefit of the doubt. Why? The claims data is dispensed more frequently, and when you see a trend based on higher quantities of data, well, that’s a stronger signal. Today’s payrolls data, by contrast, is the outlier, at least for now.
Keep in mind too that last year’s spring slowdown was preceded by a substantial rise in initial jobless claims in April 2011. History may be about to repeat, but so far there’s no sign of trouble in the claims data. Let’s see what next Thursday’s update tells us.
Meantime, no one can dismiss today’s payrolls report. The real question is whether we’ll see confirmation in the days and weeks ahead for thinking that another spring slowdown is upon us.
“It is obviously disappointing,” says Cliff Waldman, a senior economist at the Manufacturers Alliance for Productivity and Innovation. “This provides some pretty good evidence that part of the strength of the prior two months was probably seasonal.”
Tony Crescenzi, a strategist at Pimco and author of Beyond the Keynesian Endpoint: Crushed by Credit and Deceived by Debt — How to Revive the Global Economy, is also cautious. “We see a lack of sustainability in terms of strong job growth,” he advises via Bloomberg. “This is still not strong enough to create escape velocity, which is to say an economy strong enough to make it on its own without additional monetary stimulus from the Federal Reserve.”
This post originally appeared at The Capital Spectator and is posted with permission.
4 Responses to “Job Growth Slows Sharply In March”
It is true that the headline jobs number was disappointing, but who is to blame, the economy or the headline writers? There are other numbers in the report that rarely make the headlines:
1. Last month's jobs number was revised up by 14k, and January's, although revised down by 9k from the second estimate given in early March, is still 32k above the value initially reported for it in early February. Upward revisions have been the rule, not the exception, for several months. No guarantees, of course, but something to keep in mind.
2. The most impressive unnoticed number in today's BLS report was the robust decline in the broad unemployment rate (U-6), which fell by 0.4 percent. U-6 now stands almost three percentage points below its peak. It is one of the best available measures of "job market stress" because it includes discouraged workers and involuntary part-time workers. The March drop in U-6 happened because many involuntary part-time workers either found full-time jobs or had their hours increased to full time. That is not a sign of a slowing labor market.
3. The decline in public sector jobs, which has been a drag on the economy for months as "austerity USA" has devastated state and local budgets, paused in March. Public sector job loss was just 1,000 jobs.
Check out this brief slideshow for charts of these and other indicators: http://tiny.cc/6urccw
Even when you place a shining light (solar energy generated if you like) on this jobs report and revisions, you can not raise the dead economy. Zombie banks, government spending to provide basic income, obesity as a disability (and other health care squeezes), leveraged middle class, a trillion dollar college economy…etc. I could go. You have to take off the rose colored glasses and realize we are at an endgame. 50 moves without a pawn move and you have stale mate. We are at move 30 (month to month) 2013 will be a disaster. We needed "austerity" a generations ago, now is to late. Print to infinity the Fed shall do. I would bet all my fiat dollars on that.
I have no trouble with the idea that America is in long-term decline and will be eaten alive by vampire squids and yawning deficits if we do not change our ways. I rant about those and many other failings as much as anyone.
Still, we will have business cycles along the way. May as well look at all the data every month, not just cherry-pick the numbers that fit our mood. I still think the obsession with the monthly jobs number as THE indicator of everything is way, way overdone.
"I still think the obsession with the monthly jobs number as THE indicator of everything is way, way overdone"
Agree. What I think is being grossly ignored is that any number we see is artificial and of course debt driven. THE indicators to watch (of everything going wrong) is the US treasury market. We see artificial low yield due to manipulation (Fed purchase) without which the jobs number may be averaging 100,000. Same type of manipulaton is happening in the silver market. US treasury yields, silver/gold prices, and US unemployment rate will rise together as the debt economy gets further into the trillions. This will be sad but interesting.