Jobs Report: Smaller-than-Expected Gains, Topline Rate Ticks Down to 8.2%
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A disappointing 120,000 jobs were added to the economy in March, well below expectations. However, the topline unemployment rate fell again to 8.2%. The revisions for January and February were mixed, with employment revised down a bit for January (to +275,000 from +284,000) and up in February (from +227,000 to +240,000).
The drop in the topline rate can be explained by a small drop in both the labor force participation rate (to 63.8%) and the employment-population ratio (to 58.5%). When less people are part of the labor force, you can have drops in the unemployment rate despite modest gains in jobs.
Why were the gains so modest? Private-sector employment gains slowed from its average over the past three months. For the first time in a long while, the public sector didn’t really drag on employment – just 1,000 job losses for the public sector. But the private sector, which had been adding close to 250,000 jobs a month for the past three months, this time added half that, at 121,000.
The establishment survey shows gains in health care (+26,000), restaurants and drinking establishments (+37,000) and a big gain in manufacturing (+37,000), but a big drop in retail trade employment (-34,000), with general merchandise stores taking the biggest hit. I know that Best Buy announced store closings over this period. We are seeing a kind of transformation of retail, with the rise of online shopping and e-books and the like.
In more troubling news, the average workweek fell in March, down 0.1 hours. The manufacturing workweek also fell, by a larger amount, 0.3 hours. Average hourly earnings did rise, however.
We still have a major problem with long-term unemployment. There are 5.3 million long-term unemployed counted by the Bureau of Labor Statistics in this survey, defined as those out of work for 27 weeks or more. That’s 42.5% of the total unemployed, and that percentage crept down this month, but is basically unchanged from December 2011. The only way the total number is dropping, it seems, is from people dropping out of the labor force. This is an enormous social problem that public policy must contend with. Skills erosion, the piling on of debts, depression – all of these are evident with the long-term unemployed. And we know that because of the payroll tax cut deal, they will no longer get a full 99 weeks of unemployment benefits. So this social crisis will get worse.
All in all, I cannot see being happy with these employment numbers. They represent a step back after several months of decent gains. And they fall well below the consensus. Perhaps the data will be revised up at some point, but for the moment, the analysis that growth will slow in 2012 looks to be sadly on target.
UPDATE: Given the margins of error in the report, you could always go with Ryan Avent’s summary.
UPDATE II: Dean Baker’s take.