New hires fall to 88,000, more people drop out of labor force
WASHINGTON (MarketWatch) — The United States created the fewest number of jobs in March in nine months, adding to a string of reports suggesting companies have cut back on new hires and that the economy is slowing again.
The U.S. added a seasonally adjusted 88,000 jobs last month — the smallest increase since last June — and nearly half-a-million people stopped looking for work last month, according to data issued by the Labor Department Friday.
The March jobs report fell well below Wall Street expectations. Economists polled by MarketWatch had forecast a 190,000 increase in jobs. U.S. stock futures SPM3 -1.16% slumped after the report.
“What we have in today’s employment report is what the ISM data and the auto (not truck) sales indicated, the economy is expanding but not accelerating. And with that, we can probably put to rest recent FOMC chatter about things starting to get good enough to begin strategizing on how to pare back monthly purchases of Treasurys and agency mortgage-backed securities,” said Steve Blitz, chief economist of ITG Investment Research, in a note to clients.
The unemployment rate fell a tick to 7.6% from 7.7%, marking the lowest level since December 2007, but the decline stemmed from more Americans dropping out of the labor force.
The participation rate, which measures the number of working-age people who have or want a job, fell again to 63.3%. That’s the lowest level since spring 1979.
The slacker pace of hiring in March overshadowed revised gains for job creation in the first two months of 2013. The number of new jobs created in February was revised to 268,000 from 236,000, while January’s figure was revised up to 148,000 from 119,000.
Until the March employment report, the U.S. labor market appeared to be gaining momentum. The economy had added an average of 220,000 jobs a month from November to February in a sharp pickup since last fall.
The disappointing March jobs report is sure to revive concerns that the economy could cool off again in midyear like it did in both 2012 and 2011. In both years, hiring started out strong but later petered out.
Most economists have been predicting the economy would slow in the second quarter after a strong start to the new year. Growth in the second quarter is forecast to decelerate to 2.2% from an estimated 3.0% in the first three months of 2013. The onset of large federal spending cuts and a soft global economy are among the drags on growth, analysts say.
Still, the meager increase in jobs in March could portend an even sharper slowdown.
There was some silver linings in the employment report. Hiring remained brisk in professional services, health care and construction — bastions of strength over the past year. A recovery in the housing market is one reason why economists don’t think the economy will soften as much in the spring and early summer as it did in the past two years.
What’s more, the average workweek rose another notch to 34.6 hours, matching the highest rate since the end of the recession. The workweek usually rises when the economy strengthens and companies add more workers.
Yet average hourly wages only edged up 1 cent to $23.82, while the increase over the past 12 months tapered off to 1.8% from 2.1%. Wages would have to rise a lot quicker to give consumers more buying power and fuel faster economic growth.
Even if the March dip in hiring proves temporary, the U.S. still would need to create new jobs at a much faster clip to slash unemployment. The recovery has been usually slow by historical standards and the nation would need to generate monthly job growth in 250,000 to 300,000 range to reduce unemployment to precession levels of less than 6%.
Jeffry Bartash is a reporter for MarketWatch in Washington.
