Sunday, April 7, 2013

March job slowdown- signal or noise?

Friday's job report showed a slowing of the strong growth we'd seen in the last few months, with only 88,000 more jobs created, (95,000 in the private sector). Granted, strong revisions to the previous 2 months left us up nearly 150,000 from where we thought we were last month, so it's really not that bad, but after averaging over 187,000 jobs a month since June, 88,000 jobs isn't even half that.

So why did it happen? Is it related to the budget sequester that took place on March 1 and was kept in place with the late-March budget deal? The numbers would certainly add up, because the CBO paper on the sequester's effects estimated it would lower job creation by about 750,000 in the last 10 months of the year, or 75,000 jobs a month. Add 75,000 to 88,000, and you get to 163,000, which is in line with the job growth since last Summer.

But it's also worthy to remember that many of the furloughs and other sequester-related events have yet to take full effect, so let's take a look inside the March job stats to see if we find anything else. First, let's look at the sectors that gained the most in March.

Biggest job gains, March
Health care- 23,400
Temporary help services- 20,300
Construction- 18,000
Food service/ drinking places- 13,000
Accounting services- 10,700

Nothing out of the ordinary with the first 2- they've been steadily growing at this rate for the last year. Same for bars and restuarants. Construction is worth noting, especially since the big gains were in "specialty trade contractors." This matches up with data that shows the U.S. housing market keeps coming back, with rising home values in most U.S. cities, and a 27.7% year-over-year increase in housing starts reported for February 2013. So that tells me at least that element of the economy didn't slow in March.

Let's go to the other side - which areas lost jobs in March.

Biggest job losers, March
Clothing and clothing stores -15,300
Postal service -11,700
Building + garden supply stores -10,100
Heavy and civil engineer construction -8,800
Truck transportation -6,900

The clothing and garden supply store reductions could certainly be related to the crappy weather much of the country was stuck in for March. Kinda hard to shop for summer clothes and lawn care items when it's 25 and snowing. But it also could portend for slower consumer spending in March, and with the sequester reducing incomes for a large amount of workers, this may be the start of a trend. The Postal Service reductions are probably workers heading to the exits before looming cutbacks hit that area, which is largely the result of GOP-led measures in 2006 that led to pre-funding of all of the Post Office's retirement obligations, helping cause a multi-billion dollar deficit today. Heavy construction is an odd one, but it reflects lower-than-normal March increases instead of layoffs, which also seems to point to bad weather as the reason, reducing the need to hire for road construction.

So maybe the slow March job numbers are a blip reflecting a short-term slowdown in consumer spending which reduced the need to hire for industries who usually have to add staff once the Spring flowers start blooming. We'll see if this turns around in April when it warms up and people start wanting to be outside spending money and being recreational (well, IF it warms up in April. Those of you up North that are dealing with another 3-5 inches of snow may be waiting a while).

I'll deal with the unemployment rate drop to 7.6% another time (it's mostly related to a lower amount of people in the work force, could be an aging Boomer thing). But until I see more evidence that consumer spending is really slowing down or once unemployment claims start picking up consistently (they were up on a seasonally-adjusted basis last week, but had the same numbers as the previous week on a raw number basis), I'll just chalk up these low March figures to bad weather, which puts it in the "noise" category, instead of as a signal of a slower economy.

The bigger concern for me is buried at the bottom of the report, where average weekly wages were up only 2.1% for the last 12 months, barely above inflation. In an economy that's still got 70% of it based on consumer spending, it's going to be hard to have any kind of major expansion as long as people aren't taking home any extra money. That's where you'll need to stay tuned, because that's exactly where these austerity measures are going to be reflected if they really do start slamming the brakes on what was a solidly-growing economy for most of the 1st Quarter of 2013.


  1. I've checked the 2010 and 2011 age distribution of the population, and it seems that between July 1st of those two years the fraction of the 16+ population who were under 65 dropped by almost exactly 0.2%. So I'd expect labor force participation rate drops of that magnitude annually on the basis of the boomer demographic factor, but not monthly.

    Having said that, it's well within the normal monthly fluctuations of the labor force participation rate ( so it can't be called anything but noise at this point. As an economic indicator, I'm more of a fan of the employment-population ratio anyway ( since it gets around the whole issue of the U3 rate being subject to whether folk are feeling encouraged into or discouraged from looking for work.

    Agree that static real wages are a grave concern.

  2. The participation rate is definitely a teller, and it still is low. But I also wonder how much of that is aging Boomers, so it's not as bad as it looks. I also believe that seasonal effects get overrated, so fewer people "jump in" as the weather warms, but the adjustments haven't caught up to that yet