The March labor report was a mixed bag of goods. The numbers were good, but not nearly good enough. In fact if the labor report is any indication of the economy, then clearly the economy is stuck in neutral. As CBS News reported the job crisis is far from being behind us.
The unemployment figure dropped to 7.6%, the lowest it has been since December 2007. The real unemployment rate was 13.8%, the lowest it's been in four years. However that number is only obtainable because once again workers are dropping out of the labor market. The percentage of Americans working or looking for jobs fell to 63.3% in March, the lowest in nearly 34 years, CBS reported. Nearly a half a million people stopped looking for work.
There were only 88,000 jobs created in March and that is the smallest gain in the past 10 months. This number is well below the level needed to keep pace with population growth and considerably lower than Wall Street estimates.
The New York Times said this is the “third consecutive spring in which employers tapered off their hiring,” a phenomenon that economists are calling the “spring swoon.” The spring swoon can turn into a summer wilt as new graduates, students returning from school, and the full impact of government spending cuts hit the market.
Wall Street had projected 190,000 jobs for March and the actual number overshadowed the revised figures for January and February. January was revised up from 119,000 to 148,000 and February was changed from 236,000 to 268,000. That is an additional 61,000 jobs and coupled with March’s 88,000 it is still significantly lower than the March estimate of 190,000.
The good news is that the housing market continues to show signs of recovery and economists are predicting that may ensure that the expected midyear slowdown will not be as severe as it was in 2011 and 2012.
Professional and business services added 51,000 jobs, health services added 23,000, and the construction industry added 18,000. These three industries have been the most resilient over the past year, but even they showed a marked slowdown for March. The government labor force continued to shrink, including seeing 12,000 U.S. Postal Service job cuts.
Total unemployment dropped from 14.3% to 13.8% and the number of unemployed people dropped from 12.2 million to 11.7 million. The average duration of unemployment is 39.6 weeks and 39.6% (we need to play that number) of the total of unemployed people are considered long term unemployed.
The bad news of course is that this continues to be one of the slowest recoveries in American history. The labor report portends an economy in danger of slipping back into recession. The economy has only generated 5.8 million jobs in the past three years and needs to add 3 million more just to get back to prerecession levels To reach the prerecession unemployment rate of 6% the economy would have to generate 250,000 to 300,000 jobs a month. At the current pace of 160,000/month it would take 19 months to get back to prerecession levels.
For millenials this could mean more time stuck in their parent’s basement and for older workers it could mean dipping into their savings to keep afloat. Joshua Shapiro, chief economist at MFR Inc., told the New York Times, “The drop in the participation rate has been centered on younger workers many of whom have given up hope of finding a decent job and are instead continuing in school and racking up enormous amounts of student debt, which has contributed to the recent surge in consumer credit outstanding.” Christine L. Owens, executive director of the National Employment Law Project, said “think about long-term unemployed workers who are in midlife and older workers who are likely dipping into retirement savings in order to stay afloat. We’re setting ourselves up for somewhere, 10 years down the road, when a lot of retirees who didn’t expect to live in poverty are going to be in poverty.”
It is unlikely that we will see the job market grow by the 56% to 87% required to reach 250,000 to 300,000 jobs per month. Analysts are predicting a deceleration in growth in the second quarter. That prediction is based on the past midyear results in 2011 and 2012, as well as the expected impact from a soft global economy and the cuts in government spending.
Economists remain cautiously optimistic about the economy, noting that the unemployment figures are likely to be revised upward, however there is no doubt that this was not a good report.