On the front page of the U.S. Bureau of Labor Statistics’ website, there’s a handy link to the changes in monthly non-farm payrolls for the previous decade.
This always is a good place to turn when assessing the most recent jobless figures, especially on a day like Friday.
Wall Street analysts and the Twitterverse are beside themselves over the Labor Department’s latest hiring survey, which shows non-farm employers added 88,000 positions in March, the fewest since June of last year, and far fewer than the 190,000 that Wall Street was expecting.
Some variation of “Not good” will echo throughout financial markets Friday.
“This is an exceptionally weak report,” wrote James Marple, a senior economist at Toronto-Dominion Bank.
“Top line of employment report bad in every direction,” tweeted Douglas Holtz-Eakin, the former head of the Congressional Budget Office.
Stock markets in New York and Toronto dropped. Canada’s dollar fell nearly 1 per cent to just less than 98 U.S. cents. The U.S. dollar fell against the euro.
Let’s get back to the recent history of the payrolls report.
Fact: Hiring dips, even in good times.
Take 2004, when the U.S. labour market really started rallying after a recession. Starting in March, employers added 333,000, 247,000, and 306,000 jobs consecutively. Then momentum stalled, as hiring dropped to 78,000, 37,000, and 125,000 over the next three months.
In every year between 2004 and 2006 – the pre-crisis boom period – there were months when hiring apparently fell off a cliff.
With that in mind, what is the March jobs report saying? A few things stand out.
First, those who questioned how the tepid U.S. economic growth could generate jobs in excess of 200,000 a month were onto something.
The three-month average growth of non-farm payrolls now is 168,000 after jobs growth in the previous two months was revised higher. That seems more in line growth that averaged an annual rate of 1.75 per cent over the second half of 2012. (Growth in the first-quarter might have approached a 3-per-cent rate.)
This is hardly anything to get excited about, but nor is it evidence that the U.S. economy necessarily is heading into another springtime swoon.
That could happen. It’s entirely possible Washington’s failure to soften the blow of the sequester drove businesses back to the sidelines. But demand isn’t in retreat: The average workweek increased by 0.1 hour to 34.6 hours. That signals stability, if not further hiring in months ahead.
The second thing to note is that the March jobs numbers should mute talk of the Federal Reserve easing up on its asset-purchase program anytime soon.
Hiring indicators are especially important for gauging monetary policy these days because the Fed intends to ease stimulus only when it’s satisfied the outlook for the labour market has improved substantially. The slowing of the overall rate of hiring argues for leaving current policy alone.
And third, take note of the labour participation rate.
The U.S. unemployment rate dropped to 7.6 per cent from 7.7 per cent, but only because the labour force declined by 496,000 in March, according to a separate Labour Department survey of households. The labour-force participation rate declined 0.2 percentage points to 63.3 per cent, its lowest May, 1979.
The shrinking labour pool is explained to some extent by demographic changes: As the overall population ages, workers are retiring.
The weak economy also has caused younger people to go back to – or stay in – school.
Yet some economists noted Friday that the decline in the labour force is too big to be explained by demographics alone.
That has implications for monetary policy. If there has been a structural shift, and the pool of workers now is too small to produce as much as it has in the past, policy makers would have to raise interest rates sooner or risk inflation.
Overall, the March jobless figures argue against complacency about the U.S. recovery. They don’t argue for giving up on it.
Jobs growth is weaker than anyone would like, and weaker than in recoveries past. But everyone should know by now that past recoveries teach us little about the present. Any disappointment Friday is the result of the hopeful getting ahead of themselves.