Yes, the March Jobs Report Was Disappointing. No, You Shouldn’t Freak Out.

 

Wall Street was predicting a March payrolls number of around 180,000. But it came in light at 89,000. Another positive month, though. One of many. As IHS Markit notes (bold is mine), “The string of consecutive months of payroll growth is now 78—the longest since official record keeping began in 1939. One can infer from the length of recessions prior to 1940, that the string is also the longest since 1854.”

Still, not long after, the following phrase was trending on Twitter: “Big Slowdown for U.S. Economy.” It came from a New York Times story whose headline (which I clicked) was then apparently altered to the less apocalyptic “Job Growth Loses Steam as U.S. Adds 98,000 in March.”

But the damage was done. The Twitterverse, especially the anti-Trump section, had heard enough. Among the tweeted responses, stuff like this:

Trump still gonna tweet “JOBS! JOBS! JOBS!” after reports of this Big Slowdown for U.S. Economy or is he gonna go “the numbers are fake”?

And this:

Apparently being the best jobs president ever involves delivering less jobs than were expected…Big Slowdown for U.S. Economy

There were even suggestions that last night’s Syrian missile strike was meant to divert attention from this horrific jobs report.

People need to settle down. First, these monthly numbers are volatile and get revised. It’s always smart to average. And if you do, you’ll see that over the past three months, job gains have averaged 178,000 per month vs. 187,000 last year. So a modest slowdown — with some bad weather effects in play — during a long recovery.

Second, the unemployment rate fell to 4.5% from 4.7%, the lowest level since May 2007. And the broader U-6 (unemployment and underemployment) dropped to its lowest level since December 2007. And that while the participation rate held steady and employment rate ticked up. Also, wage growth was ok, with a year-over-year increase of 2.7%.

IHS Markit offers this summation: “All this suggests that one, job growth in the quarter remained steady, and two, there is some more excess capacity in the labor market, but the amount of slack is modest.”

But slack there seemingly is. The economy keeps creating jobs, and wage growth is modest. So perhaps still not at full employment. Recall this recent SF Fed report: “After applying a new method to adjust for demographic changes in the labor force, the current unemployment rate is still 0.3 to 0.4 percentage point higher than at past labor market peaks. This indicates that the labor market may not be quite as tight as the headline unemployment rate suggests.”

And as Dean Baker points out, “wages have grown at just 2.4 percent comparing the average of the last three months to the prior three months. This should give pause to those concerned about the labor market being too strong. The fall in the length of the workweek, coupled with modest wage growth, indicates there is much room for further strengthening.”

One might also point out this divergence, as ex-Obama economist Jason Furman did on Twitter: “All workers wages +2.7% while excluding managers is only +2.3%. Could be more wage inequality after previous narrowing.”

Published in Economics
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  1. Chris Campion Coolidge
    Chris Campion
    @ChrisCampion

    And….economic chowderheads chime in:

    One might also point out this divergence, as ex-Obama economist Jason Furman did on Twitter: “All workers wages +2.7% while excluding managers is only +2.3%. Could be more wage inequality after previous narrowing.”

    Right.  That’s what it indicates.  Something about inequality something something.

    The larger point, though, about not getting tweaked on monthly data is correct.  With adjustments, the number is and of itself a bit meaningless, and the fact that you should be looking at average growth numbers, and consider seasonality (not Wessonality) are also things to be considered.

    That said, wage growth is still the wrong end of a donkey.  You can slap whatever lipstick you want on it but wages are stagnant, the types of jobs (the mix of new ones created) tends to be weighted toward the less skilled/educated end, which is not a good indicator of anything other than increased consumption of Big Macs.

    Or McRibs, if you’re this guy.

    Image result for john yoo

     

    • #1
  2. Fake John/Jane Galt Coolidge
    Fake John/Jane Galt
    @FakeJohnJaneGalt

    Wake me when my wife and friends can find good paying jobs.  Until then I will assume this is just more political arguments to confuse the masses.

    • #2
  3. Chris Campion Coolidge
    Chris Campion
    @ChrisCampion

    Fake John/Jane Galt (View Comment):
    Wake me when my wife and friends can find good paying jobs. Until then I will assume this is just more political arguments to confuse the masses.

    We’ve got ’em in North Carolina!  Come in and GET SOME.

    Seriously.  I moved from Vermont 2 years ago this month.  Just put a house under contract today (I’ve been house-hunting for probably 3-4 months, only seriously looking to buy in the last 2).  The equivalent house in Vermont is (wait for it) more than $200K more.

    Federalism works.

    NC:  $258K

    http://www.realtor.com/realestateandhomes-detail/8120-Pelorus-Ln_Charlotte_NC_28269_M50974-53686

     Vermont:  $484K

    http://www.realtor.com/realestateandhomes-detail/17-Whiteface-St_South-Burlington_VT_05403_M48316-46727

    • #3
  4. I Walton Member
    I Walton
    @IWalton

    Why should fundamentals change until the new Administration changes the fundamentals, i.e. Obamacare and other oppressive regulations.  Nothing substantial has happened yet.  We’ll know when we start seeing a little inflation.

    • #4
  5. Ekosj Member
    Ekosj
    @Ekosj

    The Bureau of Labor Statistics does TWO surveys.   The Establishment Survey was uninspiring.    But what about the Household Survey?  Let’s have a look…

    Yowza! My go-to jobs number is from the Household Survey….

    Employed, Usually Work Full Time. Data set LNS12500000

    Yes. Full time jobs.

    UP by 476,000 full time jobs!!!!

    Couple that with the 326,000 added in February and 457,000 added in January … That is a pretty good run!!! I always say I don’t want to get too amped up about any one month, but this is the kind of job growth we have been needing for years!!! I hope it continues.

     

    • #5
  6. Chris Campion Coolidge
    Chris Campion
    @ChrisCampion

    Ekosj (View Comment):
    The Bureau of Labor Statistics does TWO surveys. The Establishment Survey was uninspiring. But what about the Household Survey? Let’s have a look…

    Yowza! My go-to jobs number is from the Household Survey….

    Employed, Usually Work Full Time. Data set LNS12500000

    Yes. Full time jobs.

    UP by 476,000 full time jobs!!!!

    Couple that with the 326,000 added in February and 457,000 added in January … That is a pretty good run!!! I always say I don’t want to get too amped up about any one month, but this is the kind of job growth we have been needing for years!!! I hope it continues.

    More jobs is good news, but it’s the mix of the types of jobs that is telling, and the overall trends.  Much of what’s been added as new jobs in the last few years has been in the service industry.  When median household incomes are at or above their 1999-2000 levels – a level they haven’t seen in close to 20 years now – then you’ll know there’s really a recovery going on.

    The trends are good.  But this recession has produced one of the slowest recoveries in the last 100 years.  And we had 8 years where annual GDP never once went over 3%.  A new record for the Barry administration.

    So I tend to put irrational exuberance on the back burner, where it belongs.

     

     

     

    • #6
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