March Employment Report Little Cause for Cheer

http://www.bls.gov/news.release/empsit.nr0.htm

On Friday the Bureau of Labor Statistics (BLS) released its monthly employment report for the month of March.  The addition of 216,000 jobs and the drop in the official U3 unemployment rate to 8.8% was widely cheered as evidence of an economic rebound gathering steam.  This is good news, no doubt.  But a closer look at the data reveals that it’s statistically insignificant – little more than “noise” in the data.  Here’s the calculation of U3, along with my own tally (using the government’s data) of a more realistic figure.

Unemployment Calculation

Beyond those headline figures, there’s really little cause for cheer.  Consider the following chart of the number of unemployed Americans:

Unemployed Americans

The figure continues to rattle around the 18 million mark as it has since the beginning of the great recession. 

And here’s a chart of per capita employment in the U.S., or the percentage of the total population that’s employed:

Per Capita Employment

This figure too hovers near its lowest level.  March marked the fourth consecutive monthly gain in this figure, but that happened once before in early 2010, and the March figure is now lower than it was at the end of that previous 4-month streak, in spite of being helped by new census data that actually reduced the U.S. population slightly.  Following that previous 4-month streak, per capita employment actually fell back to nearly the lowest level of the recession. 

It may happen again.  The employment data may be at or near its zenith.  Though the economy enjoyed a nice little bounce driven by consumers throwing caution to the wind for Christmas, the economy is once again facing stiff headwinds.  Oil prices are skyrocketing and inflation is beginning to permeate the broader economy.  Congress is making serious efforts at slowing spending.  And, perhaps most significantly of all, the Federal Reserve is nearing the end of QE2, its program for pumping a hundred billion dollars per month into equities.  It’s now April and the old Wall Street saw of “sell in May and walk away” could turn into a stampede when the timing coincides with the Fed’s removal of the punch bowl.  It’s not hard to envision the beginning of a second dip of inflation by summer. 

Back to the jobs report.  The 216,000 new jobs reported in March break down as follows:

  • professional and business services:  + 78,000
  • health care:  + 37,000
  • leisure and hospitality:  + 37,000
  • manufacturing:  + 17,000
  • mining:  + 14,000

The gain in manufacturing was the fourth consecutive gain.  However, it also marks the third consecutive decline in those gains, falling from + 49,000 in January.  That’s not a good sign for the health of the overall economy going forward – a sign that although this jobs report was a good one, the gains in employment may be peaking.

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