Hiring tapers off as economy fails to gain speed
It looks as if the “spring swoon” is back.
U.S. employers added an estimated 88,000 jobs to their payrolls last month, compared with 268,000 in February, according to a Labor Department report released Friday. It was the slowest pace of growth since last June, and less than half of what economists had expected.
It also was the start of a third consecutive spring in which employers have tapered off their hiring after a healthy start to the year. Slowdowns in the previous two years could be attributed to flare-ups in the European debt crisis, but this time the cause is unclear. The recent payroll tax increase or political gridlock in Washington could be to blame for the sudden retreat in hiring, but neither seems to be showing up much in other relevant economic data.
“People were starting to believe the economy was really picking up steam, and desperately wanted this report to be better,” said Joshua Shapiro, chief economist at MFR Inc. “But that didn’t happen.”
Economists like Shapiro cautioned that the numbers, which are adjusted for normal seasonal variations, are very volatile from month to month and are still subject to revision.
Nonetheless, the closely watched monthly jobs report was discouraging.
The unemployment rate, which comes from a different survey, ticked down to 7.6 percent in March, from 7.7 percent, but for the wrong reason: because more people reported dropping out of the labor force (meaning they are neither working nor looking for work), not because more people were hired.
The labor force participation rate has not been this low — 63.3 percent — since 1979, a time when women were less likely to be working.
Baby boomer retirements may account for part of the slide, but discouragement about job prospects in a mediocre economy still seems to be playing a large role, economists say.
“The drop in the participation rate has been centered on younger workers,” said Shapiro, “many of whom have given up hope of finding a decent job and are instead continuing in school and racking up enormous amounts of student debt, which has contributed to the recent surge in consumer credit outstanding.”
Investors initially responded to the jobs report by sending the major stock market indexes down more than 1 percent. But as the day went on, strategists sent out reports noting that the economic slowdowns in previous years ended up being temporary. The Standard & Poor’s 500-stock index climbed back to end the day down only 0.4 percent.
“Given the noise in the data you don’t want to set your pants on fire about it,” said Michael Feroli, chief U.S. economist at JPMorgan Chase.
Job gains in March were concentrated in professional and business services and health care.
The government again shed workers, as it has been doing for most of the last four years, though reductions at the Postal Service accounted for most of the latest decline. Economists expect more government layoffs in the months ahead as the effects of Washington’s across-the-board budget cuts make their way through the system.
“While the recovery was gaining traction before sequestration took effect, these arbitrary and unnecessary cuts to government services will be a headwind in the months to come, and will cut key investments in the nation’s future competitiveness,” Alan B. Krueger, the chairman of President Barack Obama’s Council of Economic Advisers, said in a statement.
The latest report should quiet speculation that the Federal Reserve will take its foot off the monetary accelerator anytime soon, as some had suggested after a spike in hiring in February. Even before Friday’s numbers came out, though, Fed officials had expressed concerns about not only the pace of job growth, but the quality of hiring as well.
“It’s important to look at the types of jobs that are being created because those jobs will directly affect the fortunes and challenges of households and neighborhoods as well as the course of the recovery,” Sarah Bloom Raskin, a member of the Federal Reserve Board, said in a recent speech.
She noted that relatively low-wage sectors like food services and retail businesses have accounted for a large share of the job growth in the last few years; a report in August from the National Employment Law Project, a liberal advocacy group, found that a majority of jobs lost during the recent recession were in the middle range of wages, while a majority of those added during the recovery have been low-paying.
In March, in fact, jobs in food services and drinking places accounted for the largest share of total American employment on record. Today nearly 1 in 13 American jobs is in this industry.
Raskin also expressed concern about temporary jobs, which account for a growing share of total employment.
“Temporary help is rapidly approaching a new record,” said Diane Swonk, chief economist at Mesirow Financial, who noted that there was also a rapid increase in temp hiring during the boom years of the 1990s. “That of course means more flexibility for employers, and less job security for workers.”