Though Jobless Rate Dips, March Jobs Number Disappoints

Job seekers at an employment fair in San Antonio Photograph by Eddie Seal/Bloomberg

The curse of spring is on us again. A hot start to the year has faded with a poor March jobs report, as labor force participation fell to its lowest level in 34 years. The U.S. economy created just 88,000 jobs in March, the Bureau of Labor Statistics reported Friday. This is well below expectations. The average estimate of economists surveyed by Bloomberg was for a gain of 190,000. This marks a big slowdown from February’s pace of 268,000 (revised), which ended up being surprisingly strong.

Despite the weak number, the unemployment rate fell to 7.6 percent, from 7.7 percent. As it so often is, that dip in the unemployment rate was a function of a decline in the size of the labor force, which shrank by 496,000 people. The labor force participation rate fell to 63.3 percent, its lowest level since 1979. Hours and earnings were essentially flat.

Signs of a March slowdown were evident in data released earlier this week. Jobless claims rose for the third straight month. The services sector grew at its slowest pace in seven months. The ADP payrolls number showed that private firms added 158,000 jobs, far fewer than expected.

Hiring was relatively weak in the construction sector in March. Though construction employment grew by 18,000 in the BLS report, the ADP report showed essentially no growth. That is perhaps due to a slowdown in rebuilding activity from Hurricane Sandy. Cold weather may also have dampened things. This is the opposite of what happened this time last year, when unseasonably warm weather in February and March pulled forward a bunch of activity, including hiring.

Though we shouldn’t put too much emphasis on one month’s report, it does throw cold water on some of the recent euphoria over first-quarter growth, which many economists increasingly think will be in the range of 3 percent.

In a Thursday afternoon note to clients, Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities, cautioned that a weak March jobs number could “send markets into another slowdown tizzy.” In premarket trading, U.S. stock futures were deep in the red.

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