This past Friday the Bureau of Labor Statistics (BLS) released the monthly labor report, showing job gains of 120K, far below the 200K expected. The unemployment rate dropped 1/10th percent to 8.2% as over 100K people quit looking for work. Contrary to a popular myth, when someone runs out of unemployment benefits they do not drop out of the workforce as long as they are continuing to look for work.
Although this report was a disappointment, the economy has added 247K jobs per month over the past quarter. As I have done the past few months, I will look beyond the seasonally adjusted headline numbers to the unseasonally adjusted year-on-year job gains of the core work force. These core figures tempered my enthusiasm in January and February and, as you will see, temper my disappointment in March’s headline numbers.
The core work force, men and women aged 25 – 54 years old, continues to show accelerating job gains. In February, the year over year (y-o-y) gain was 350K. In March, the gain was 374K, a modest gain but still gaining. A decline in that gain would be cause for worry.
This core work force metric is a powerful leading indicator of the health of the economy, as I will show below in this monthly chart of y-o-y job gains or losses. January 2008 was the first month that year over year gains slipped below 0 and proved to be the canary in the coal mine that the economy was weakening.
Let’s expand the picture as I have done the past few months, looking at the larger pool of workers aged 25+. The March y-o-y gain did decline somewhat from 2079K to 2048K. While job gains are strong, the acceleration has reversed. Did the record breaking warm winter weather push spring hiring forward into January and February? Could be. Does the March 34K loss in retail jobs largely account for this slight dip in job gains? Could be.
There are several long term trends that are cautionary, revealing some structural weaknesses in the economy and the recovery. The number of people who want work but have not looked in the past four weeks, referred to as discouraged workers, was essentially unchanged. The number of long term unemployed was unchanged. The average work week fell .1 hours and the income gains of workers shows an annual increase of only 2.1%. However, the number of people working part time because they could not find a full time job fell almost 10%, an encouraging sign.
In short, this is a mixed report but one that I see, on balance, as more encouraging than discouraging.