Hiring by American employers trailed the most pessimistic forecasts in March, casting doubt on the strength of the expansion now in its third year.
The 120,000 increase in payrolls reported by the Labor Department in Washington yesterday was the smallest in five months. The data also showed the unemployment rate fell to 8.2 percent as people left the labor force, while workers put in fewer hours.
The figures, which followed an average 246,000 increase in payrolls in the previous three months, underscored Federal Reserve Chairman Ben S. Bernanke’s concern that stronger economic growth is required to keep powering the labor market. Yesterday’s report showed a drop in weekly earnings that bodes ill for consumer spending at a time when Americans are paying more at the filling station.
“Not welcome news,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “The economy needs a lot of momentum to get through the latest headwind of the return of $4 gasoline, and this report is distinctly on the slow side.”
Among those having trouble finding work is Chris Rhoads-Ford, 41, who has been unemployed since January 2009, when his job as a senior writer at the American Civil Liberties Union was eliminated. Since then, Rhoads-Ford has been surviving on contract work, part-time jobs and loans from his family. His unemployment benefits ended in October.
‘Out of Options’
“We’re quickly running out of options,” said Rhoads-Ford, who lives in Alexandria, Virginia, with his wife and 6-year-old daughter. “I’m actually pretty scared.”
Payrolls in February rose a revised 240,000. The median projection in the Bloomberg survey called for a 205,000 gain in March, with estimates ranging from increases of 175,000 to 250,000.
“We see modest growth inside the U.S. and demand for labor,” Carl Camden, president and chief executive officer of Kelly Services Inc., a Troy, Michigan-based staffing agency, said March 12 during a conference. The expansion is “a nice steady, not robust, not rock-and-roll, but a steady recovery, capable of producing a steady stream of jobs.”
S&P 500 futures expiring in June slumped 1.1 percent to 1,374.90 yesterday in New York following the benchmark index’s 0.7 percent weekly loss. U.S. stock exchanges were shut for the Good Friday holiday. The yield on the benchmark 10-year Treasury note fell to 2.05 percent from 2.18 percent. The dollar dropped 1 percent to 81.55 yen and declined 0.2 percent to $1.3088 per euro.
The March data showed a 34,000 decrease in retail employment, the biggest decline since October 2009. A milder winter may have limited hiring as workers were added to payrolls in previous three months at the expense of March. The Labor Department said that the number of people unable to work due to inclement weather was 360,000 below average from December through February.
Temperatures in December through February averaged 36.8 degrees Fahrenheit (2.7 degrees Celsius), 3.9 degrees above the average in the 20th century, representing the fourth-warmest winter on record for the 48 contiguous U.S. states, according to the National Oceanic and Atmospheric Administration.
“We had mild weather, which basically had consumers in the marketplace earlier,” said Jack Kleinhenz, chief economist of the National Retail Federation, a Washington-based trade group. As a result, retailers postponed headcount reductions that typically follow the holiday shopping season, he said.
J.C. Penney Co., the fourth-largest U.S. department store, said yesterday that it’s planning to fire 1,000 workers as part of a restructuring plan.
Employment at service providers increased 89,000 last month, less than half the 211,000 gain in February, the Labor Department said. Professional and business service payrolls rose 31,000 last month, restrained by a 7,500 drop in temporary hiring.
The jobs report broke a pattern that was boosting President Barack Obama’s re-election prospects and prompted a renewed attack on his record by Mitt Romney, the leading contender for the Republican nomination.
“Millions of Americans are paying a high price for President Obama’s economic policies, and more and more people are growing so discouraged that they are dropping out of the labor force altogether,” Romney, a former Massachusetts governor, said in a statement released by his campaign.
Obama said “we welcome” the added jobs and the decline in the unemployment rate. The economy’s created more than 4 million private sector jobs in the past two years, more than 600,000 in the past three months, he said.
“But, it’s clear to every American that there will still be ups and downs along the way and that we’ve got a lot more work to do,” the president said at a forum on women and the economy at the White House.
Only one president since World War II, Ronald Reagan, has been re-elected with a jobless rate above 6 percent. Reagan won a second term in 1984 with 7.2 percent unemployment in the month of the election, after the rate had fallen almost three percentage points in the previous 18 months.
The jobless rate dropped as both unemployed and employed workers left the labor force. The participation rate, which indicates the share of working-age people in the labor force, fell to 63.8 percent from 63.9 percent.
Xander Piper, 30, who has been looking for a full-time job since September, when he completed a master’s program in social science at the University of Chicago. He decided to go to graduate school in 2010 to improve his employment prospects after losing his position at an advertising agency.
10 Resumes a Day
“When I graduated, I assumed I was going to get a job within the first couple of months,” said Piper, a San Francisco resident who said he’s looking for work in education and sometimes sends out 10 resumes a day.
“Now I work for a temp company, but even they’re having trouble staffing me,” he said. “I recently had a two to three month break at my temp company. What I have gotten recently is call center work, which is just brutal.”
Some economists saw similarities with early 2011, when the economy slowed amid rising energy prices, a disruption of supplies caused by the tsunami in Japan and political gridlock in the U.S. over the debt ceiling.
This year, rising gasoline prices and the European debt crisis are taking a toll, said Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania.
Even so, “We are definitely in a better place today than we were a year ago, and two years ago,” he said. “The thing that’s quite amazing is how well the economy’s performed given all those headwinds.”
Manufacturing Bright Spot
Manufacturing was among the few industries that added more jobs than in February, with a 37,000 increase. In the last four months, factories have added 148,000 workers.
Sustained auto purchases are prompting Ford Motor Co., the second-biggest U.S. automaker, to bring in more workers. The Dearborn, Michigan-based manufacturer boosted its 2012 sales forecast to 14.5 million to 15 million vehicles from a previous projection of 13.5 million to 14.5 million.
“We’ve already announced some shift increases, some adds in terms of shifts this year,” Erich Merkle, sales analyst at Ford, said April 3 on a conference call with analysts. “So, certainly we’ll be adding some people to fill those shifts.”
Bernanke, in a speech to economists on March 26, said the recent employment gains have been a “welcome development. Still, conditions remain far from normal, as shown, for example, by the high level of long-term unemployment and the fact that jobs and hours worked remain well below pre-crisis peaks.”
Pace of Improvement
“We cannot yet be sure that the recent pace of improvement in the labor market will be sustained,” Bernanke said, adding he was particularly concerned about the number people out of work for six months or longer.
Yesterday’s report also showed a decrease in long-term unemployed Americans. The number of people unemployed for 27 weeks or more eased as a percentage of all jobless, to 42.5 percent from 42.6 percent.
Average weekly earnings fell to $806.96 in March from $807.56. The average work week for all workers decreased to 34.5 hours from 34.6.
Wage increases are needed to help Americans weather gasoline prices that have increased by 66 cents this year through April 5, to $3.94 a gallon, according to data from AAA, the nation’s largest auto club.
The so-called underemployment rate, which includes part-time workers who’d prefer a full-time position and people who want work but have given up looking, decreased to 14.5 percent from 14.9 percent.
A separate report yesterday from the Fed showed consumer borrowing rose less than forecast in February, restrained by a drop in credit-card debt. Credit increased $8.7 billion, the least in four months, after an $18.6 billion gain in January.