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Last Update: 05-Apr-13 08:56 ET
Employment Report Disappoints in March
Nonfarm payrolls added just 88,000 new jobs in March. That was down from an upwardly revised 268,000 (from 236,000) additions in February and was the smallest increase in jobs since June 2012. The Briefing.com consensus expected payrolls to add 192,000 jobs. Private nonfarm payrolls did slightly better, up 95,000. That is still well below consensus forecasts (210,000) and what was added in February (254,000). The initial claims level for most of March dipped below 350,000. Typically, these levels would suggest job growth in the neighborhood of 200,000. The large miss suggests that businesses are content with their current workforce, which explains the low layoff rate, but are still unsure about future demand. Further evidence of this comes from the average workweek, which ticked up to 34.6 hours in March from 34.5 in February.
It is possible that the demand uncertainty was a result of the sequestration, which took effect in March. If businesses were worried about how the government cutbacks would reduce overall economic growth, then they would likely wait on hiring decisions until the growth trends became more clear. Hourly wage growth was flat in March after increasing 0.1% in February. Overall, aggregate wages increased 0.4%, which is enough to keep consumption growth trending higher. The unemployment rate dipped to 7.6% in March from 7.7% in February. The decline in the unemployment rate, however, was not due to job growth. The labor force participation rate dropped to levels not seen since the late 1970s and caused the unemployment rate to decline. If the labor force participation rate had remained at February levels, the unemployment rate would have increased to 7.9%.
It is possible that the demand uncertainty was a result of the sequestration, which took effect in March. If businesses were worried about how the government cutbacks would reduce overall economic growth, then they would likely wait on hiring decisions until the growth trends became more clear. Hourly wage growth was flat in March after increasing 0.1% in February. Overall, aggregate wages increased 0.4%, which is enough to keep consumption growth trending higher. The unemployment rate dipped to 7.6% in March from 7.7% in February. The decline in the unemployment rate, however, was not due to job growth. The labor force participation rate dropped to levels not seen since the late 1970s and caused the unemployment rate to decline. If the labor force participation rate had remained at February levels, the unemployment rate would have increased to 7.9%.
