March Jobs Report Disappoints

Just as with every month, traders focused particular attention on the March employment report, which was released after the markets closed for the week. It was fortunate that markets were closed, because the report introduced new uncertainty into the economic outlook.

As a recap, 120,000 jobs were added to payrolls in March and the unemployment rate dipped slightly to 8.2%. Economists expected job growth of 201,000.

The disappointing report followed job growth of 275,000 and 240,000 in January and February, respectively.

Even though recent data suggested growing confidence in the private sector, private sector payrolls only grew by 121,000 in March.

Economists were hopeful the labor markets were finally moving towards greener pastures, particularly given the consistent improvement in initial claims for unemployment insurance, which are at post-recession lows.

Adding further frustration to economists’ view of labor, underlying components are simply not improving. The employment-population ratio currently stands at 58.5%, levels last experienced in the 1980s.

In addition, for those individuals without a job, the picture is difficult, at best. More than 40% of the unemployed have been without work for at least 26 weeks, accounting for 5.4 million people.

There were small pieces of good news sprinkled in the labor report, though. For instance, the underemployment rate, which includes marginally attached workers, dropped to 14.5%, the lowest level of the past 3.5 years.

March data was obviously quite disappointing, but it is difficult to determine whether this was simply a hiccup in the trend of broader improvement or the start of a new round of weakness.