Daily Updates

April 5, 2013

US adds just 88K jobs; rate drops to 7.6 pct.

WASHINGTON — U.S. employers added just 88,000 jobs in March, the fewest in nine months and a sharp retreat after a period of strong hiring. The slowdown may signal that the economy is heading into a weak spring.

The Labor Department said Friday that the unemployment rate dipped to 7.6 percent, the lowest in four years, from 7.7 percent. But the rate fell only because more people stopped looking for work. People who are out of work are no longer counted as unemployed once they stop looking for a job.

The percentage of working-age adults Americans with a job or looking for one fell to 63.3 percent in March, the lowest such figure in nearly 34 years.

Stocks plummeted after the report. The Dow Jones industrial average dropped 110 points in late-morning trading. Broader indexes also declined.

March’s job gain was less than half the average of 196,000 jobs in the previous six months. The government said hiring was even stronger in January and February than previously estimated. January job growth was revised up from 119,000 to 148,000. February was revised from 236,000 to 268,000.

Several industries cut back sharply on hiring in March. Retailers cut 24,000 jobs after averaging 32,000 in the previous three months. Manufacturers cut 3,000 jobs after adding 19,000 the previous month. Financial services shed 2,000.

Some economists said retailers might have held back on hiring because March was colder than normal. That likely meant Americans bought fewer spring clothes and less garden equipment. Clothing stores shed 15,000 jobs, and building material and garden supply stores shed 10,000.

The Labor Department uses a survey of mostly large businesses and government agencies to determine how many jobs are added or lost each month. That’s the survey that produced the gain of 88,000 jobs for March.

The government uses a separate survey of households to calculate the unemployment rate. This survey found that the number of people either working or looking for work fell by nearly 500,000. It was the sharpest such drop since December 2010. And the number of Americans who said they were employed dropped nearly 210,000.

The percentage of working-age adults in the labor force is a figure that economists call the participation rate. At 63.3 percent, it’s the lowest since 1979. Normally during an economic recovery, an expanding economy lures job seekers back into the labor market. This time, many have stayed on the sidelines, and more have joined them.

Longer-term trends have helped keep the participation rate down. The vast generation of baby boomers has begun to retire. The share of men 20 and older in the labor force has dropped as manufacturing has shrunk.

Some who have left the job market are getting by on government aid, particularly Social Security’s program for the disabled. The share of women working or looking for work has plateaued, and fewer teenagers are working.

Heidi Shierholz, says the labor force participation among those ages 25 to 54 — “prime age” workers — has dropped  to 81.1 percent. It hasn’t been lower since 1984.

This could be the fourth straight year that the economy and hiring have shown strength in the winter and early spring, only to weaken afterward. Last year, for example, job gains averaged 262,000 a month in the January-March quarter, but then fell to a pace of 108,000 in the April-June quarter.

Economists blame a range of factors for the trend. Europe’s financial crisis intensified in 2010 and 2011. And Japan’s earthquake and tsunami disrupted U.S. manufacturing in 2011. The government’s seasonal adjustment process may also be exaggerating the winter gains and depressing the summer figures.

In March, average hourly pay rose a penny, the smallest gain in five months. Average pay is just 1.8 percent higher than a year earlier, trailing the pace of inflation, which rose 2 percent in the past 12 months.

“This is not a good report through and through,” Dan Greenhaus, chief economic strategist at brokerage firm BTIG, said in a note to clients.

Some economists said they expect any weakening this spring to be milder than in the past three years.

“We don’t anticipate the slowdown becoming too severe, not when the housing recovery is firing on all cylinders, but it is a reminder that the U.S. is still unable to sustain what used to be just average rates of growth,” said Paul Ashworth, an economist at Capital Economics.

Gary Burtless, senior fellow in economic studies at the Brookings Institution, notes that some Americans have likely stopped looking for work because their unemployment benefits have run out. People must be looking for a job to qualify for unemployment benefits.

“If people aren’t collecting benefits, they have one less reason to be out pounding the pavement looking for a job,” Burtless says.

Most analysts think the economy strengthened from January through March, helped by the pickup in hiring, a sustained recovery in housing and steady consumer spending. Consumers stepped up purchases in January and February, even after Social Security taxes increased this year.

Still the higher taxes have reduced paychecks. And many economists say steep government spending cuts that began taking effect March 1 could slow growth in the spring and summer.

Nariman Behravesh, chief economist at IHS Global Insight, said employers may be slowing hiring in anticipation of the impact of the spending cuts.

As federal agencies and contractors cut back in coming months, Behravesh expects jobs growth to average 100,000 to 150,000 a month, down from an average 212,000 from December through February.

“The good news is that this is happening at a time when the private economy is gaining momentum,” Behravesh said. He expects hiring to pick up after mid-year.

Craig Alexander, chief economist with TD Bank Financial Group, said the economy  isn’t growing fast enough to generate many jobs. He expects the economy to grow around 2 percent this year, a sluggish pace. He thinks it would be growing faster, perhaps at a 3 percent annual rate, if not for the Social Security tax increase and the federal budget cuts.

“Fiscal austerity is having an impact,” Alexander said.

 

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