Blog : Jobs Report Greeted With Relief

by Ed Zwirn on April 4th, 2014

The sighs of relief were probably audible on Wall Street this morning, following the release of this morning's Non-Farm Payrolls report from the Bureau of Labor Statistics.

The release showed that 192,000 jobs had been added in March, slightly lower than the consensus, which had expected the figure to come in at 197,000. At the same time, the change in total employment for January was revised, from 129,000 to 144,000, and the change for February was raised from 175,000 to 197,000.

What this reveals is a picture of the U.S. labor market that, while still an anemic one, was not as bad as had been earlier supposed, with an average of about 178,000 jobs a month being added during Q1. Monthly job growth has averaged 183,000 over the past 12 months, according to this morning's report.

In addition, March's unemployment rate was reported unchanged at 6.7%, while the number of unemployed persons stayed flat at about 10.5 million. Both numbers have shown little change since December 2013. At the same time, the average weekly workweek for all employees edged up by 0.2 hours, to 34.5 hours, offsetting the net decline which had occurred over the prior three months.

These figures, while not exactly the stuff that dreams are made of, has to be considered good news for the market for everything from penny stocks to blue chip shares. The market had apparently already bet big on this jobs report, with the Dow Jones Industrial Average up 1.5% in the four days leading up to the release.

Today's numbers were apparently priced into the market and should, in and of themselves, prompt no major movement. Only a major downside (or upside) surprise would have had any large effect on stocks.

That being said, this morning's jobs numbers paint a picture of a labor market which has improved more so far this year than had been previously thought, and should raise the general view of the performance of the U.S. economy, which has suffered from everything from government cutbacks to (more recently) bad weather.

With Congressional elections set for November, the erratic nature of the government budget and payroll has apparently calmed down for now (remember the sequestration?). In fact, employment in government was basically unchanged for the month. A decline of 9,000 federal jobs last month was mostly offset by an 8,000 person increase in local government jobs, excluding education.

In terms of the weather, I suppose it was inevitable, but with the advent of spring, the outlook for the U.S economy appears to have improved even as the first buds have appeared on plants and the first shoots of grass have broken through the ground. The labor market sectors which have gained ground include employment and professional services, which added 57,000 jobs in March, healthcare, which added 19,000, and mining and logging, in which employment rose by 7,000, construction (19,000) and food services and drinking places (30,000).

These headline numbers notwithstanding, the jobs market report revealed some weaknesses.

For one thing, employment in other major industries like manufacturing, wholesale and retail trade, and information and financial services were basically unchanged in March, reflecting continued weakness.

Also indicative of continued weakness is the fact that the number of unemployed people in the U.S. remained essentially unchanged (at 10.5 million) in March and has remained stagnant since December, meaning that the recent increases in employment, while welcome news, have done little more than keep up with a growing workforce. In addition, the number of long-term unemployed (those jobless for 27 weeks or more), at 3.7 million, was little changed in March. These people constituted 35.8% of the unemployed as of March. Also, the number of discouraged workers, those who have given up looking for work, is still very high at 698,000.

In March, some 2.2 million people were only marginally attached to the workforce, little changed from a year earlier. These people were not counted among the unemployed because they had not searched for work over the prior four weeks. Those working part-time because their hours had been trimmed or because they had been unable to find full-time work also continues at an unhealthy level, 7.4 million, little changed in March.

Taking a longer-term view, there has been progress seen in the labor market over the past year. One year ago, the number of unemployed persons was 1.2 million higher and the unemployment rate, at 7.5%, was 0.8% more than it is today. The number of long-term unemployed was reported down by 837,000 over the past year.

These trends, while not indicative of blockbuster progress, have been pronounced enough to produce concern that the U.S. Federal Reserve would soon begin to raise interest rates, with the unemployment rate nearing the 6.5% tripwire announced in previous guidance. This prompted Janet Yellen, in her inaugural press conference as Fed chief and other subsequent public statements, to essentially disavow this tripwire, noting the real weaknesses that still persist in the economy, for the many who had not been paying attention.