Tea Leaf: 8.2 percent or 11.3 percent unemployment?

Published: Wednesday, April 11 2012 2:00 p.m. MDT

People pass a military jet while attending a job fair for veterans, Wednesday, March 28, 2012 at the Intrepid Sea, Air and Space Museum in New York.

Associated Press

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March employment gains were less than expected, less than exciting, less than worth writing home about and will again pose the question of whether U.S. job creation is about to slow as summer months approach. Such a pattern occurred during the past two years.

The American economy added 120,000 net new jobs during March, sharply below the consensus expectation of 205,000 net new jobs. The gain was the smallest in five months and was less than half the average gain of the three prior months. In addition, previously reported job gains during January and February were revised higher by only 4,000 jobs, breaking a pattern of sizable upward revisions to prior data that had largely been occuring for some time.

Better news saw the nation’s unemployment rate decline from 8.3 percent in February to 8.2 percent in March — but NOT for the right reason. The rate declined only because an estimated 164,000 people, presumably discouraged at the prospect of finding a job, dropped out of the labor force in March.

The household survey, from which the unemployment rate is derived, also reported a decline of 31,000 employed people in March. One lumps various numbers together to arrive at the 8.2 percent rate.

Much weaker-than-expected employment data in March validated recent views of Federal Reserve Chairman Ben Bernanke that the prior pace of more solid job gains could not be sustained unless and until U.S. economic growth picked up. In a presentation on March 26 (to a room full of economists no less), Bernanke stated that recent employment gains had been a “welcome development.”

“Still,” he continued, “conditions remain far from normal, as shown, for example, by the high level of long-term unemployment and the fact that jobs and hours worked remain well below pre-crisis peaks. We cannot yet be sure that the recent pace of improvement in the labor market will be sustained.”

Job detail

The 120,000 net rise in employment, for a change, did not include a major hit to estimated state and local government employment (I will come back to that). The private sector added 121,000 net new jobs in March, led by the addition of 31,000 new jobs in goods production.

Manufacturing continued its promising stretch of new job creation. The addition of an estimated 37,000 net new jobs in March sees total manufacturing employment up by 470,000 jobs since January 2010, according to the U.S. Department of Labor’s Bureau of Labor Statistics. The construction sector (down 7,000 jobs) and logging and mining (up 1,000 jobs) were less newsworthy.

The nation’s private service providing sector added 90,000 jobs in March, led by the addition of 39,000 net new jobs in leisure and hospitality; 37,000 net new jobs in education and health services; and 31,000 jobs in professional and business services. According to the BLS, employment in professional and business services has climbed by 1.4 million jobs since reaching a low point in September 2009. In contrast, the retail trade sector lost an estimated 34,000 jobs in March, the largest monthly decline since October 2009.

State and local

Local government payrolls have now reached their lowest level in six years, a sign that municipalities still face fiscal strains almost three years after the end of the recession, according to a Bloomberg.com story. The total of 14.1 million local government employees is the smallest since February 2006.

State government payrolls, less tied to the sluggish nature of property taxes, rose for the third month in a row to 5.1 million. The streak of job gains was the longest since 2008. Both sectors will likely stay under pressure as the combined pace of tax collections in 2011’s final quarter was the weakest in a year. Total employment within the state and local government sector has fallen by 640,000 positions since 2008.

8.2 percent or 11.3 percent?

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