Ed Dolan's Econ Blog

US Payroll Job Growth Slows; Unemployment Rate Drops as Labor Force Shrinks

The U.S. economy created a disappointing 88,000 payroll jobs in March, according to today’s report from the Bureau of Labor Statistics. That was down sharply from the 268,000 gain in February. The unemployment rate fell to 7.6 percent, a new low for the recovery, but even that was largely due to a drop in labor force participation.

The bulk of the 88,000 new jobs were created in the private service sector. Professional and business services provided 51,000 jobs, followed by 44,000 in educational and health services. Goods producing industries contributed just 16,000 jobs, mostly in construction. Manufacturing employment fell slightly. Government employment continued its long downward trajectory, led by a loss of 14,000 federal jobs. State government employment gained slightly and local government jobs barely changed.

The 88,000 increase in payroll jobs was especially disappointing after the strong growth reported in January and February. The latest report revised job gains upward for both of those months, but the total of 504,000 payroll jobs created in the first quarter of 2013 was still well below the 626,000 for the fourth quarter of 2012.

The unemployment rate is based on a separate survey of households that differs from the establishment survey in methodology and includes self-employed and farm workers. The household survey showed a decrease in both the total number of employed workers and the total number of unemployed, accompanied by a drop in the labor force participation rate. The March unemployment rate of 7.6 percent was down by slightly more than a tenth of a percentage point from February’s rate of 7.7 percent.

The BLS also publishes a broader measure of unemployment, U-6, that includes discouraged workers and involuntary part-time workers. That measure dropped sharply in March, from 14.3 percent to 13.8 percent. As did the standard unemployment rate, U-6 reached a new low for the recovery. The decrease was largely due to a drop in the number of people who were working part time for economic reasons, but who would prefer full-time work.

Data on the duration of unemployment provide still another perspective on the strength of the labor market. Here the picture was mixed. The number of workers unemployed for more than 27 weeks showed a welcome decrease, and their share of all unemployed dropped from 40.2 percent to 39.6 percent. However, the number of those out of work for 5 weeks or less also fell, sending the mean and median duration of unemployment slightly higher.

On the whole, the March jobs report is consistent with other indicators of a slowing economy. The advance estimate of GDP for the first quarter, due out at the end of April, is likely to confirm that picture. All of these numbers should provide food for thought for Washington policymakers, who, far from looking for ways to get the economy back on track, seem intent on squabbling over whether to use tax increases or spending cuts to slow the recovery further.

4 Responses to “US Payroll Job Growth Slows; Unemployment Rate Drops as Labor Force Shrinks”

TomApril 5th, 2013 at 12:23 pm

Try looking also at not seasonally adjusted employment figures, and you'll see the pattern looks similar but the strong and weak parts of the shift around. Frankly it looks like news addicts getting overexcited by seasonality, which is somewhat shifted in time by imperfect seasonal adjustment but is still just seasonality. We are not really having strong winters and weak summers, we've been on a roughly flat weak job growth trend since 2010.

TomApril 5th, 2013 at 7:51 pm

Another way to look at the same thing is year-on-year job growth. Interestingly, that's been trending gradually down from a peak of more than 2.4 million in Feb-March 2012 to just under 2 million in March '13.

benleetApril 7th, 2013 at 3:37 pm

The labor participation rate is at a 34 year low; not since May 1979 has it registered at 63.3%. The U3 unemployment rate, officially at 7.6%, arguably is 11.7%. Heidi Shierholz at wrote that it could be 9.8% using a hypothetical participation rate estimated by the CBO. I think the CBO rate is too low. The historical average labor participation rate over the 20 year period 1988 to 2008 looks like around 66.3%. If we us the 20 year average labor participation rate, then the U3 for today at that rate would be 11.7%, not 9.8%, not 7.6%. If today we had a participation rate of 67.1%, the rate of 1997, '98, '99, and 2000, then another 8.756 million workers would be participating, and all of them would be out of work, raising the unemployment rate from 7.6% to 12.7%, an increase of 5.1%.
In addition, the employment to population ratio has not hit such a low since 1983, 30 years ago.
The broader U6 rate arguably is higher than the official 13.8%. With the same particiption rate as 1997 – 2000 the U6 would be 18.9%. Then add the number working full-time year-round for less than poverty level for a family of four, 11.5% of the work force, and one reaches 30.4% of the work force who are either with no job, not enough job, or not enough pay to break out of poverty. Or looking further at the Social Security Administration report on wages and salaries for 2011, some 47.4% of all workers, over 71 million workers, earn less than $25,000 a year in wages. The median annual wage/salary income is $26,965 for 2011. These workers are earning considerably less than the average wage income of $41,211, and considerably less than the overall personal income (including all income sources) average of around $80,000 a year per worker. Whether 30% of all workers or 47%, the number who are not participating in prosperity is enormous and pernicious. My blog is — I follow the unemployment story each month for my own understanding. I used data from the National Jobs for All Coalition from this source,

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Richard has published papers on wages policy, the taxation of financial arrangements and macroeconomic issues in Pacific island countries. Views expressed in these articles are his own and may not be shared by his employing agency. He is the author of How to Solve the European Economic Crisis: Challenging orthodoxy and creating new policy paradigms