Swing and a miss. A big miss. A really big miss. U.S. employers added just 120,000 jobs last month, the Labor Department said on Friday. That’s the smallest increase since October. Economists polled by Reuters had expected nonfarm employment to increase by 203,000. And as economist Robert Brusca points out, “The strong amazing run in household jobs came to a crashing halt as employment in that survey fell by 31,000 after rising by 42,000 last month and 847,000 the month before that.”
Then there’s the unemployment rate, which dipped to 8.2% from 8.3% the month before. That extends the longest streak of 8%-plus unemployment since the Great Depression. The U.S. economy hasn’t been below 8% unemployment since Obama took office in January 2009. And back in May 2007, unemployment was just 4.4%. (And keep in mind that average hourly wages are up just 2.1% over past year. But inflation up 2.9% (2.2% core). American workers are losing ground.) As Barclays Capital puts it: “Overall, the report had an undeniably weak tone and will raise doubts about the strength of the labor market. Given that the report reflects only one month of data and some of the underlying cyclical sectors registered payroll gains, we do not view it as conclusively signaling a shift to a lower trend rate of employment growth.”
And here’s how economic consulting firm IHS Global Insights views the report:
March was expected to bring another good jobs report, and it failed miserably. The streak of 200,000-plus monthly payroll gains ended at three. Job gains were almost 100,000 below expectations, the workweek shrank, and the decline in the unemployment rate reflected not more employment, but fewer people looking for work.
The big disappointments were in private services, where retail had a second successive bad month, and temp jobs fell for the first time since last June. Construction jobs fell for the second month in a row, but that is not too surprising – although the weather was exceptionally warm in March, it probably didn’t help construction as much as in January or February.
One disappointing jobs report is not reason to panic, but it will dampen some of the optimism about the strength of the recovery this year.
Recall that back in 2009, White House economists Jared Bernstein and Christina Romer used their old-fashioned Keynesian model to predict how the $800 billion stimulus would affect employment. According to their model—as displayed in the above chart, updated—unemployment should be around 5.8% today.
But the true measure of U.S. unemployment is far worse:
1. If the size of the U.S. labor force as a share of the total population was the same as it was when Barack Obama took office—65.7% then vs. 63.8% today down from last month—the U-3 unemployment rate would be 10.9%.
2. But what if you take into the account the aging of the Baby Boomers, which means the labor force participation (LFP) rate should be trending lower. Indeed, it has been doing just that since 2000. Before the Great Recession, the Congressional Budget Office predicted what the LFP would be in 2012, assuming such demographic changes. Using that number, the real unemployment rate would be 10.5%.
3. Of course, the LFP rate usually falls during recessions. Yet even if you discount for that and the aging issue, the real unemployment rate would be 9.4%.
4. Then there’s the broader, U-6 measure of unemployment which includes the discouraged plus part-timers who wish they had full time work. That unemployment rate, perhaps the truest measure of the labor market’s health, is still a sky-high 14.5%.
5. The employment-population ratio dipped to 58.5% vs. 61% in December 2008. An historically low level of the U.S. population is actually working.
6. The number of long-term unemployed (those jobless for 27 weeks or longer) account for 42.5% of the unemployment. That number is basically stuck. It was the same, for instance, in August 2010 and last December.
Bottom line: The economy is adding jobs but not very quickly, which is to be expected given GDP growth of around 2% or so. A Great Recovery after the Great Recession? More like the Great Stagnation …
James Pethokoukis is a columnist and blogger at the American Enterprise Institute. Previously, he was the Washington columnist for Reuters Breakingviews, the opinion and commentary wing of Thomson Reuters.
Pethokoukis was the business editor and economics columnist for U.S. News & World Report from 1997 to 2008. He has written for many publications, including The New York Times, The Weekly Standard, Commentary, National Review, The Washington Examiner, USA Today and Investor’s Business Daily.
Pethokoukis is an official CNBC contributor. In addition, he has appeared numerous times on MSNBC, Fox News Channel, Fox Business Network, The McLaughlin Group, CNN and Nightly Business Report on PBS. A graduate of Northwestern University and the Medill School of Journalism, Pethokoukis is a 2002 Jeopardy! Champion.
Pethokoukis can be reached [email protected] or follow him on Twitter @JimPethokoukis