Jobs report for March a disappointment. What happened?
The US economy created only 88,000 jobs last month. Possible factors include the increase in payroll taxes, which went into effect at the beginning of the year, and the tailing off of repairs from superstorm Sandy.
March appears to have been a clunker for the economy.Skip to next paragraph
In Pictures Dying Jobs
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In a surprise to most economists, the economy created 88,000 jobs last month, the Bureau of Labor Statistics (BLS) reports. If that level were to continue, it would imply very slow economic growth.
At the same time, the unemployment rate edged lower, from 7.7 percent to 7.6 percent. But the main reason for the drop was fewer people in the workforce, probably because they could not find jobs.
It was not clear why job growth was so weak after growing by 268,000 in February and 148,000 in January, economists said. There were no high-profile weather events, and the effect of the budget battle in Washington that resulted in sequestration had not really kicked in yet.
From a policy standpoint, the latest numbers were likely to reinforce the Federal Reserve’s stimulus policy, economists said.
“There had been some talk that maybe the Fed might start to stop being so accommodative,” says John Silvia, chief economist at Wells Fargo in Charlotte, N.C. “This number will temper that view: The Fed’s policies will remain in place.”
Although sequestration, the forced reductions in federal spending, is taking place, it is still too early to see the impact of that policy, economists say.
In the March report, federal government jobs declined by 14,000. Of those, 12,000 were attributed to reductions in the US Postal Service, which were not part of sequestration.
Although some federal agencies announced plans to furlough workers in advance of the actual implementation of sequestration, most are not beginning the reductions in hours until this month.
“We would have seen the effect of sequestration in a reduction of hours worked, but those did not go down,” Mr. Canally says.
The average workweek in terms of hours rose last month by 0.1 hours, to 34.6 hours worked per week, according to the BLS.
The report continues a recurring trend of the last few years, Mr. Silvia says: Businesses are optimistic starting the year, hire lots of workers, and then become more conservative by spring.
“We’ve had this trend of the second quarter starting out weaker for the last five or six years,” he says.
In an analysis released Friday, IHS Global Insight, an economic forecasting firm based in Lexington, Mass., projected that the economy grew by 3.8 percent in the first quarter. But the firm expects only 0.4 percent growth in the second quarter.