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March jobs numbers disappoint--I mean REALLY disappoint
04/06/2012 4:59 pm EST
Today the Department of Labor announced that the economy added just 120,000 jobs in March. That was down from 240,000 new jobs in February and below the median forecast among economists surveyed by Bloomberg of 205,000. The March disappointment also broke a string of months with gains of 200,000 or more.
Today’s numbers are a dose of cold reality thrown on any inclination that the U.S. stock market might have to look past disappointing first quarter earnings figures on the hope that U.S. economic growth for the rest of the year would be stronger than expected. First quarter earnings are forecast to have grown by just 0.93% from the first quarter of 2011, according to Standard & Poor’s Capital IQ. In the first quarter of 2011 the annual earnings growth rate was 19.7%. First quarter earnings season officially kicks off with Alcoa’s (AA) report after the close of the New York markets on Tuesday, April 10.
The number of new jobs wasn’t the only measure that fell in March. Weekly hours worked fell to 34.5 from 34.6 in February. Hourly earnings increased by 0.2% but with the economy creating only 120,000 new jobs in March, aggregate wages were flat on the month after climbing 0.7% in February. That’s not good news for an economy where consumer spending makes up 70% of all economic activity.
The official unemployment rate did drop to 8.2% from 8.3%, but that was only because 330,000 people left the workforce.
Oddly enough, the full unemployment number, the one that counts discouraged workers who have stopped looking for work and workers in part-time jobs who are looking for full-time jobs fell in March to 14.5% from 14.9%.
That oddity raises an important question: Are today’s numbers correct? The jobs numbers have been subject to huge revisions in the slow recovery from the Great Recession. Remember August 2010 when the initial report showed the economy added 0 jobs? That initial result was revised upward the following month to 100,000 jobs added in August.
Statistically, as Ezra Klein points out in his post on the Washington Post’s WONKBLOG today http://www.washingtonpost.com/blogs/ezra-klein/post/march-jobs-report-how-bad-is-it/2012/04/06/gIQAhnTXzS_blog.html , there’s a 90% confidence level that the economy added somewhere between 20,000 and 220,000 jobs in March.
That’s quite a margin of error. In the short-term, I doubt that the market will care about the quality of this evidence of a slowdown in the economy. In the short-term this is yet one more reason to sell after the great first quarter rally. If you were inclined to think longer-term, however, I would wait for the revisions in early April before drawing any conclusions about U.S. growth.