Payroll Gains in U.S. Trail Most-Pessimistic Forecasts: Economy
Hiring by American employers trailed forecasts in March, casting doubt on the vigor of the more than two-year-old economic expansion.
The 120,000 increase in payrolls reported by the Labor Department in Washington today was the smallest in five months and less than the most pessimistic estimate in a Bloomberg News survey of economists. The unemployment rate fell to 8.2 percent from 8.3 percent as people left the labor force.
Stock futures, the dollar and Treasury yields all fell as the report highlighted Federal Reserve Chairman Ben S. Bernanke’s concern that stronger economic growth is needed to keep the nation’s jobs engine humming. Today’s data also showed that Americans worked fewer hours and earned less on average per week, boding ill for the consumer spending that makes up 70 percent of the world’s largest economy.
“We see a lack of sustainability in terms of strong job growth,” Tony Crescenzi, a strategist at Pacific Investment Management Co. in Newport Beach, California, said in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “This is still not strong enough to create escape velocity, which is to say an economy strong enough to make it on its own without additional monetary stimulus from the Federal Reserve.”
Among those having trouble finding work is 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.
Expected Work Sooner
“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.”
The median projection of 80 economists in the Bloomberg survey called for a 205,000 gain in March employment. Estimates ranged from increases of 175,000 to 250,000 after an initially estimated 227,000 gain the prior month.
S&P 500 futures expiring in June slumped 1.1 percent to 1,374.90 at 11:42 a.m. 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.
“We see modest growth inside the U.S. and demand for labor,” Carl Camden, president and chief executive officer of Kelly Services Inc. (KELYA), 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.”
Employment at service providers increased 89,000 after a 211,000 gain in February. Professional and business service payrolls rose 31,000 last month, restrained by a 7,500 drop in temporary hiring.
Part of the slowdown in March may have reflected a warmer winter, which prompted some employers to hire more or retain workers in previous months than they otherwise would have, Paul Ashworth, chief U.S. economist at Capital Economics Ltd., said in an e-mail to clients. The average gain in payrolls from December through February was 246,000.
“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.
The March data showed a 34,000 decrease in retail employment, the biggest decline since October 2009. The Labor Department said today 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.
The jobs report broke a pattern that was boosting President Barack Obama’s re-election prospects and prompted a renewed attack on his record from 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.
Alan Krueger, chairman of Obama’s Council of Economic Advisers, pointed to 25 straight months of private job growth and the creation of 4.1 million new positions as evidence the president’s policies are succeeding in reviving the economy.
“There is more work to be done, but today’s employment report provides further evidence that the economy is continuing to recover from the worst economic downturn since the Great Depression,” Krueger said in a statement.
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 unemployment rate, derived from a separate survey of households, was forecast to hold at 8.3 percent, according to the Bloomberg survey median.
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.
Private payrolls, which exclude government agencies, rose 121,000 in March after a gain of 233,000 the prior month. They were projected to climb by 215,000. Manufacturing payrolls increased by 37,000 after a 31,000 gain.
Sustained auto purchases are prompting Ford Motor Co. (F), 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.”
At the Western Area Career and Technology Center in Canonsburg, Pennsylvania, about 25 miles southwest of Pittsburgh, the job placement rate is 94 percent.
Some companies in the region, home to an energy boom related to shale gas drilling, are starting to compete for workers, Joseph Iannetti, the school’s director said April 4. Enrollment at the campus in Canonsburg, typically less than 400 students, is 430 this year, he said.
“We’re about to go into a really nice labor shortage here,” he said. “We’re seeing increasing demand for people with skill.”
The Commerce Department last week said the economy expanded at a 3 percent annual pace in the fourth quarter after a 1.8 percent rate in the prior three months. Gross domestic product grew at a 2 percent pace in the first quarter, according to the median estimate in a Bloomberg survey of economists last month.
Today’s report also showed construction companies reduced payrolls by 7,000 workers last month after a 6,000 decrease. Government payrolls fell 1,000 in March.
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.
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.”
“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.
Today’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.
To contact the editor responsible for this story: Christopher Wellisz in Washington at firstname.lastname@example.org