Heading Backward: the Miserable March Jobs Report


It would take superspin powers to portray the March jobs report as anything other than a huge step in the wrong direction. The US economy added just 88,000 jobs last month, 95,000 in the private sector as public payrolls fell by 7,000. The official unemployment rate ticked down a tenth of a point to 7.6%.

1. That is a paltry number of jobs, more or less matching assumed labor force growth per month. So the economy must add at least that many jobs just to keep the labor market at current depressed levels. In other words, at 88,000 jobs a month the economy would never ever close the jobs gap.

2. The unemployment rate dropped because of a further decline in the labor force participation rate, now at its lowest level since 1979. If that rate were merely at March 2012 levels, the unemployment rate would have been 8.3%. At January 2009 levels, 11% (or 10.98%). While going back four years ignores demographic factors like baby boomer retirements, the aging of America doesn’t explain the entire drop. (Indeed, before the Great Recession, the Congressional Budget Office predicted 2013 labor force participation would be 65.2% (vs. 63.3% in March), assuming demographic changes.)

Factoring out the retirement issue might put the adjusted unemployment rate at 9.9%, says the economics team at Hamilton Place Strategies. Also, the employment-population ratio continues to bottom feed. (See above chart).

3. Looking at the long-term term trend, the three-month average rate of payroll growth is now 168,000 vs. 183,000 for all of 2012, and 175,000 for all of 2011. I think Barclays is about right in its analysis: “Our view is that the February employment report overstated strength in the labor market, and the March report likely overstates any weakness.” Yet the three-month average for this year is far below the first-quarter 2012 average of 262,000. Hardly a sign of strength.

PethMarch2.jpg4. The job market is still falling far short of predictions made by the Obama economic team back in 2009. Thanks to the $800 billion stimulus, the unemployment rate was supposed to have dropped to 5.1% by now (see at left)

5. So what’s the problem? The payroll tax hike? The sequester? (As IHS Global Insight notes: “It is hard to blame the sequester for March’s disappointment. Federal employment did drop by 14,000, but most of that was in the US Postal Service, which isn’t affected by the sequester.”)

I think the simplest explanation is that the economy continues to grow at a weak pace — though the first quarter might actually have been pretty strong — and the result is erratic job growth. The March number could get revised higher and in the end might not look so bad. There is certainly no reason for the Federal Reserve to back off its bond buying, and every reason for Congress to stop raising taxes and begin to implement a pro-growth agenda from high-skill immigration to cutting business taxes.

There are 10 comments.

  1. Brian Clendinen Member

    For a change I don’t think the numbers are as bad as everyone is saying. U-6 (real unemployment) was at %13.6 the lowest level it has been since 2008. Secondly yes labor force participation is declining and that is not good. However, we used to have rates in the mid 50’s for decades. It was woman joining the workforce that increased that %. The real issue is the male labor force participation is at 70% now from mid 80’s. However, it has been falling since we started tracking the number in the 40’s. Therefore I don’t know if the labor force participation is as bad as everyone thinks. One would expect a decline especially with our aging population going into retirement. I mean the decline in labor force participation inversely tracks pretty close to the increase in the % of the population that is 65+.

    The real issue is the welfare state so more of these people, who don’t work, are on medical, Disability, or SS doles. I am not saying the numbers are great, but they are mediocre.

    • #1
    • April 6, 2013, at 2:58 AM PDT
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  2. Eric Hines Inactive

    I think the simplest explanation is that the economy continues to grow at a weak pace….

    Much of the reason for this can be laid off to a few factors:

    1) The costs of Obamacare are starting to become real–and in advance of next year’s sharp and permanent rise in those costs, no one is hiring this year: the costs employers will have to pay in 2014 will be based on their 2013 payroll

    2) concern over the exploding national debt–which is future taxes, a runup in inflation that will make Carter’s inflation look sedate, a spike in interest rates (which will magnify the inflation) from the realization of the poor quality of our sovereign debt, or all three,

    2a) anticipation of a hard inflation contributing to a lack of lending–lenders will be repaid with devalued dollars,

    3) the Obama tax increase combined with the expiry of the payroll tax holiday which reduced everyone’s available income,

    4) enormous Federal spending (and the resulting deficit), which crowds out spending in the private economy,

    5) some combination of the four.

    Eric Hines

    • #2
    • April 6, 2013, at 3:03 AM PDT
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  3. Eric Hines Inactive

    The debt overhang already is building apace in the private economy. Over the summer, I refinanced our home at ~3.7% interest, as did a friend of mine. We’re not alone in our financing acumen; those are common, and historically low, rates today.

    Nationally, interest rates are going to rise. Even if they only go back to historic levels–5.5%-6%-ish–that means lenders will be borrowing at those rates or a skosh less and trying to lend for a shade more, while their current income, or at least a significant portion of it, will be from payments on those those low mortgage rates. Lenders’ income from business lending will be in a similar boat.

    That split will run for 15-30 years–the duration of the loans being let today. This overhang is the backside of our bud Bernanke “stimulating” the economy by artificially suppressing interest rates. Look, though, for market rates to run well past that historical level: Carter’s 16% inflation was accompanied by 22% interest rates.

    The S&L debacle will have been just a dropped quarter on the sidewalk in comparison.

    ‘Course I could be wrong. It does happen….

    Eric Hines

    • #3
    • April 6, 2013, at 3:17 AM PDT
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  4. Garrett Petersen Inactive

    Everyone who exited the labour force did so to enter grad school. I did, so there’s n=1 right there.

    • #4
    • April 6, 2013, at 5:28 AM PDT
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  5. MACHO GRANDE' (aka - Chri… Coolidge

    I still don’t understand why the Fed, throwing 85 billion into bank reserves that they pay interest on every month (courtesy of Bernanke pushing a button in the Fed) does a damn thing to stimulate growth. A bank can have a trillion dollars available for loans, but that has zero effect on potential borrowers, other than low rates. If I don’t want to borrow because I don’t see future demand that creates an ROI that I can live with, then the interest rates matter not a whit – I’m just not going to build that new warehouse because there’s not enough demand in the market now to cover that expense.

    If anything, ZIRP shows that monetary policy has its limits. The only way to turn the economy around is to dismantle Leviathan, starting with taxes, Obamacare, and the hundreds of thousands of pages of federal regulations that cost the country over a trillion dollars each year just in compliance costs. That would be a start to fixing things, permanently.

    But we’re not interested in that. We’re interested in status quo. Again. We are going to experience the results of our mistakes.

    • #5
    • April 6, 2013, at 6:46 AM PDT
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  6. Fricosis Guy Listener

    I couldn’t bear to watch the Four Tops — Tom Friedman, Jared Bernstein, Mark Zandi, Austen Goolsbee — spin this live on CNBC. They clearly expected to do a victory lap, but ended up doing yet another Spin class.

    • #6
    • April 6, 2013, at 6:46 AM PDT
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  7. MACHO GRANDE' (aka - Chri… Coolidge

    That’s a clownshow. Nothing good can come from that discussion. Might as well put Carrot Top on for an hour to talk about super-string theory.

    Fricosis Guy: I couldn’t bear to watch the Four Tops — Tom Friedman, Jared Bernstein, Mark Zandi, Austen Goolsbee — spin this live on CNBC. They clearly expected to do a victory lap, but ended up doing yet another Spin class. · 12 minutes ago


    • #7
    • April 6, 2013, at 7:02 AM PDT
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  8. Scarlet Pimpernel Member

    Restore the payroll tax cut for people making less than $100,000–and kill the myth that these are self-paid pensions, not welfare.

    • #8
    • April 6, 2013, at 7:05 AM PDT
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  9. Steve MacDonald Inactive

    For years it has been business start ups that have fed employment. Large companies have generally either been static or declining in employee numbers. It would seem to me that the logical place to start looking for answers is in small business start ups versus previous historical periods. If your main growth engine is not growing, the focus needs to be on why.

    I have not seen a lot of data on this, but have heard a ton of anecdotes telling of increased regulation, Govt. policy uncertainty and policy induced cost escalation as key factors in driving the number of business start ups down. Obviously taxes are another element.

    In addition there are obvious opportunities for economic growth that for political or environmental reasons are not exploited. Anything related to carbon based energy/infrastructure springs to mind, as does the recent decimation of farming in the Central Valley. We simply choose not to grow in obvious areas of opportunity and place road blocks to growth – and then cry out in vocal sympathy to those negatively affected by our decisions. We then subsidise and create dependencies with those people we have hurt by our anti-growth policies. 

    Interesting times.

    • #9
    • April 7, 2013, at 3:53 AM PDT
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  10. Eric Hines Inactive

    …the logical place to start looking for answers is in small business start ups versus previous historical periods. If your main growth engine is not growing, the focus needs to be on why.

    Small businesses–not only startups, who can’t hire, anyway, but businesses with as many as 250 employees–will be especially hard hit by Obamacare requirements and costs in 2014. These mom and pop and LLC, <i>et al.</i>, managers aren’t as dumb as the Obama administration makes them out to be; they’re among those holding down their 2013 payrolls in anticipation of those 2014…costs.

    Eric Hines

    • #10
    • April 7, 2013, at 4:20 AM PDT
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