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Kimberly Amadeo

Why the March Jobs Report Disappointed

By April 4, 2012

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Friday's Employment Report disappointed analysts, who expected that somewhere between 203,00-209,000 jobs were created in March.  Instead, only 120,000 jobs were added, according to the  Bureau of Labor Statistics. This was well below both the predictions and the past months' trend:  227,000 jobs in February, and 243,000 in January. Economy-watchers were not even cheered  by the drop in the unemployment  rate, from 8.3% to 8.2%. Why was the report such a bummer?

Analysts had based their optimism an ADP report released earlier in the week, and forecasts by economists and businesses surveyed by Reuters and BusinessWeek. However, the largest job sector (business services) only produced 31,000 jobs  -- less than half the  jobs produced last month, and far less than predicted in the ADP report. Here's the job gains in other sectors:

  • Temporary help -- no growth, after adding 55,000 jobs in February.
  • Manufacturing -- 37,000, greater than forecast and more than last month.
  • Hospitality -- 39,000, mostly in restaurants.
  • Health care -- 26,000 jobs added.
  • Financial services -- 15,000, mostly in credit counseling and services.

Retail continued to shed jobs,  after staffing up for the record-breaking sales last fall. Stores let go of 33,800 workers, after releasing 28,600 in February. The jobs picture wasn't helped by a 7,000 job loss in temporary services, which had been a stalwart throughout the recession. Businesses usually hire part-time and temporary workers in the beginning stages of a recovery, before deciding to put full-time workers back on the payroll. As expected, government and construction also lost a few thousand jobs. (Source: BLS, Employment Situation Summary, April 6, 2012Bloomberg, Company Payrolls in U.S. Grow by 209,000 Workers, April 4, 2012;  )

What This Means for You

An addition 120,000 jobs per month is less than the 150,000 jobs needed to keep unemployment from worsening.  So why did the unemployment rate get better? Because workers left the labor force. Some left  because they had given up looking for work, while others simply retired, went back to school, or left to become unpaid caregivers for children or other family members.

Just to put things in perspective, it's far better than August of last year, when absolutely no new jobs were added. (To compare to other months, see Employment Statistics). Second, this report is revised a month later, after the BLS gets new data. In fact, February's Employment Report showed that 240,000 were added -- more than the 227,000 originally estimated. For that reason, don't react like analysts and buy/sell your investments based on each month's report. Remember, the trend is your friend, and the trend is still modestly strong.

However, to the millions of people still looking for a job, and even more who haven't yet re-entered the labor force, the economy needs to grow faster than last quarter's 3% rate to quickly reabsorb them. The longer people have been without a job, the more likelihood there is of creating structural unemployment. That's when job skills become outdated, no longer matching those needed by employers. This hits older workers harder because they are less likely to go back to school for retraining.

Fortunately, the House of Representatives and the Senate passed the JOBS Act. This legislation is expected to create an additional 7 million jobs and create new job training opportunities. If you are unemployed, here's more help from other About.com Guides:

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Comments

April 10, 2012 at 10:59 am
(1) Jim Wygand says:

Kimberly,
I am more encouraged by the sector breakdown of job creation than for the overall total. Manufacturing is ahead of forecast and that is a stronger indicator of revival than the aggregate number. Moreover, so far disposable income has been outpacing GDP (expenditures > output) and that is also good news.
There is still a fairly long way to go before we get back to a “new normal” but it seems clear to me that we are moving in that direction. It may well be that as you say, companies may be gearing up for more permanent jobs and are looking ahead to see what needs to be done. Some may have “overreacted” to the crisis when it broke out and confusion in the EU did not help. Now, the road ahead, albeit rocky, is at least becoming visible.
May your forecast come true – every economist’s dream!
Jim

April 10, 2012 at 3:03 pm
(2) beekay says:

the united states will never come out of this recession completely untill the price of gas and what we pay for food,rent, and medical costs come down and of course the unemployment rate gets down to at least 3%.

April 12, 2012 at 2:31 pm
(3) Chan says:

The whole country is disappointed at least from 2001.the comments from beekays holds good.

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