Pethokoukis, Economics, U.S. Economy

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.

4. 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:

Credit: Obama White House, AEI

Credit: Obama White House, AEI

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.

16 thoughts on “Heading backward: The miserable March jobs report

  1. Contrary to conventional wisdom, the aging population actually explains none of the labor force participation rate drop yet. The BLS databases were updated early, so I was able to pull the participation rates (all unseasoned because the BLS does not season the 55-and-older sets) for various age groups. The short version – those under 55 are participating at rates lower than that of the last few decades, while those over 55 are participating at or near historic highs. The longer version…

    - 16-24 years old – 52.8% (worst March since 1966)
    - 25-34 years old – 81.1% (worst March since 1983)
    - 35-44 years old – 82.3% (worst March since 1984)
    - 45-54 years old – 79.6% (worst March since 1988, with the 50-54 group’s 78.0% the worst March since 1991)
    - 55-59 years old – 73.4% (3th-best March since records began in 1977, behind only 2009 and 2010)
    - 60-64 years old – 55.0% (4th-best March since records began in 1977, behind only 2009, 2010 and 2012)
    - 65-69 years old – 32.4% (2nd-best March since records began in 1982, behind only 2011)
    - 70-74 years old – 18.3% (tied for 2nd-best March since records began in 1987, behind only 2011)
    - 75 years old and older – 8.4% (best March since records began in 1987)

    I somehow doubt that society is willingly going back to the 1-earner/2-adult household given the ever-growing tax burden.

    • that is quite a post Steve

      assuming accuracy.. then not only has the more mainstream media completely missed how dire unemployment really is….the financial media has missed it as well.

  2. Rush is quoting you saying LFPR dropped by 663,000 in March. Most sources quote just under 500,000. Please clarify.

  3. I’ve not seen it offered, but to me, the elephant no one I’ve read mentions is the over-burden Obamacare is. I don’t think it is possible to underestimate the uncertainty-factor that Obamacare has added onto everything else.

    The Fed’s policy has severely punished savers and pensioners at the expense of buying power for the credit-users. I think a lot of folks are hunkering down and there is very little trust in what is to come. Uncertainty breeds tightening. The future is uncertain and kinda bleak if you don’t work on Wall Street and like playing roulette with your life savings/retirement.

    • The Fed not only punishes savers, it enables the government to run enormous deficits at zero interest. This has brought little growth, yet exposes to country to massive interest expense once or if interest rates normalize. The result will be either huge tax increases or inflation.

  4. Elizabeth – The March 2013 BLS report shows a drop of 496,000 in the civilian non-institutional labor force participation rate. The total labor participation rate, which includes the military, shows a drop of 663,000.

  5. stevegg

    That’s not conventional wisdom on participation.

    It’s the excuse libturds make to try and explain the complete failure of libturd economics.

    All job “gains” during the Odumbo years has been in the 55+ age bracket. 25-54 employment and participation has plummeted.

    The average libturd does not have the intelligence to question this.

  6. agree w/ Rob’s comment on ObamaCare

    headwinds for business hiring from ObamaCare

    - new taxes
    - regulatory compliance costs
    - higher healthcare costs
    - mandates
    - implicit uncertainty

    Just because much of the implementation has not taken place does not negate all of the damage it has already done.

    Much of this has acted as a wet economic blanket on hiring as far back as 2009 when it became a political likelihood. And business is also currently dealing with retroactive obligations for 2014.

  7. So there is no reason for the Feds to back off of bond buying is rather offensive when describing a remedy for what is now a four and a half year recession. Bond buying is certainly keeping the financial sector healthy but the private sector eventually has to pay it back. And we can’t without inflation. Growth would have to be prodigious and that seems impossible now that the government has cemented into place a “hands on regulatory policies” and confiscatory taxes. Historically growth occurs as entrepreneurial liberty increases.

    Bond buying is a symptom of a poor economy and is not supposed to be permanent. If you can’t start the economy by bond buying eventually the battery will run down and then what? Of course low interest rates are significant, for both the feds and the private sector wealth generators; it is a double edge sword that affects the budget as well as the borrower. BTW how easy is it to get a loan? Low interest rates enhance growth and so do low taxes. But taxes are not low and regulatory costs including Obamacare defeat the low interest rates in a sizable way and that is why all the stimulus that the feds can inflict on tomorrow’s generation will not start this stagnant economy. It requires a good dose of laissez-faire and that would require a 180 degree about face which is impossible under a socialist regime.

    • Very well articulated!! I’m sure the Obama Administration will be looking for some short term targeted stuff. This is only a sugar high that will buy a quarter of growth; yet allow him to blame greedy rich people for all that ills.

  8. How bad will things have to get before there’s that moment of: “This isn’t working, 4+ years just wasted and I don’t have a job!!!”

    Do-ya think there’s this capacity of awareness on the part of the left to admit, just maybe, confiscatory taxing-n-spending, economy stifling/stunting policies don’t work a lick and are jacking things-up beyond all recognition!!! I guess when there’s no Nation left to manage, the loons will hopefully get the picture…

    • Some folks have believed that was the ultimate agenda all along….crash it and start all over. I have not wanted to believe it but either that is the goal or they are completely economically illiterate.

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