Employers Added 120,000 Jobs in March, Fewest in Five Months

Apr 6, 2012

Photographer: Tim Boyle/Bloomberg

Copyright 2012 Bloomberg.
Timothy R. Homan
 
Employers in the U.S. added fewer jobs than forecast in March, underscoring Federal Reserve Chairman Ben S. Bernanke’s concern that recent gains may not be sustained without a pickup in growth.
 
The 120,000 increase in payrolls, the fewest in five months, followed a revised 240,000 gain in February that was bigger than first estimated, Labor Department figures showed today in Washington. The March increase was less than the most pessimistic forecast in a Bloomberg News survey in which the median estimate called for a 205,000 rise. Unemployment fell to 8.2 percent, the lowest since January 2009, from 8.3 percent.
 
Faster employment growth that leads to bigger wage gains is necessary to propel consumer spending that accounts for about 70 percent of the economy. Today’s data also showed Americans worked fewer hours and earned less on average per week, helping explain why Fed policy makers say interest rates may need to stay low at least through late 2014.
 
“We see a lack of sustainability in terms of strong job growth,” Tony Crescenzi, a strategist at Pacific Investment Management Co. in Newport Beach, California, said in a radio interview on ‘Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “This is still not strong enough to create escape velocity, which is to say an economy strong enough to make it on its own without additional monetary stimulus from the Federal Reserve.”
 
Stock-index futures declined after the figures, with the contract on the Standard & Poor’s 500 Index expiring in June falling 1 percent to 1,376.3 at 8:51 a.m. in New York. The yield on the benchmark 10-year Treasury note fell to 2.08 percent from 2.18 percent.
 
Payroll Estimates

Payroll estimates from 80 economists in the Bloomberg survey ranged from increases of 175,000 to 250,000 after an initially estimated 227,000 gain the prior month. Revisions added a total of 4,000 jobs to payrolls in January and February.

The March data showed a 34,000 decrease in retail employment, the biggest decline since October 2009.

The unemployment rate, derived from a separate survey of households, was forecast to hold at 8.3 percent, according to the survey median.

The jobless rate dropped as unemployed workers stopped looking for work and left the labor force. The participation rate, which indicates the share of working-age people in the labor force, fell to 63.8 percent from 63.9 percent.

Jobs and Obama

While a 0.9 percentage-point drop in unemployment since August may underpin President Barack Obama’s standing leading up to the vote in November, only one president since World War II - - Ronald Reagan -- has been re-elected with a jobless rate above 6 percent. Reagan won a second term in 1984 with 7.2 percent unemployment in the month of the election, after the rate had fallen almost three percentage points in the previous 18 months.

Private payrolls, which exclude government agencies, rose 121,000 in March after a gain of 233,000 the prior month. They were projected to climb by 215,000. Manufacturing payrolls increased by 37,000 after a 31,000 gain.

Sustained auto sales is prompting Ford Motor Co., the second-biggest U.S. automaker, to bring in more workers. The Dearborn, Michigan-based manufacturer boosted its 2012 sales forecast to 14.5 million to 15 million vehicles from a previous projection of 13.5 million to 14.5 million.

“We’ve already announced some shift increases, some adds in terms of shifts this year,” Erich Merkle, sales analyst at Ford, said April 3 on a conference call with analysts. “So, certainly we’ll be adding some people to fill those shifts.”

Service Providers

Employment at service-providers increased 89,000 after a 211,000 gain in February. Professional and business service payrolls rose 31,000 last month, even as temporary hiring declined 7,500.

“We see modest growth inside the U.S. and demand for labor,” Carl Camden, president and chief executive officer of Kelly Services Inc., a Troy, Michigan-based staffing agency, said March 12 during a conference. The expansion is “a nice steady, not robust, not rock-and-roll, but a steady recovery, capable of producing a steady stream of jobs.”

At the Western Area Career and Technology Center in Canonsburg, Pennsylvania, about 25 miles southwest of Pittsburgh, the job placement rate is 94 percent.

Some companies in the region, home to an energy boom related to shale gas drilling, are starting to compete for workers, Joseph Iannetti, the school’s director said April 4. Enrollment at the campus in Canonsburg, typically less than 400 students, is 430 this year, he said.

Demand for Skills

“We’re about to go into a really nice labor shortage here,” he said. “We’re seeing increasing demand for people with skill.”

Matt Stuckey, 42, sought work for several months in 2011. In February, the former U.S. Marine officer became a marketing director for the United Services Automobile Association, a San Antonio, Texas-based provider of financial services to military personnel.

“During the fourth quarter of last year it was very quiet,” he said in a March 27 telephone interview. “Then at the beginning of the year the job market just turned on.”

The Commerce Department last week said the economy expanded at a 3 percent annual pace in the fourth quarter after a 1.8 percent rate in the prior three months. Gross domestic product grew at a 2 percent pace in the first quarter, according to the median estimate in a Bloomberg survey of economists last month.

Construction Jobs

Today’s report also showed construction companies reduced payrolls by 7,000 workers last month after a 6,000 decrease. Government payrolls fell 1,000 in March.

Average weekly earnings fell to $806.96 in March from $807.56, today’s report showed. The average work week for all workers decreased to 34.5 hours from 34.6.

Wage increases are needed to help Americans weather gasoline prices that have increased by 66 cents this year through April 4, to $3.94 a gallon, according to data from AAA, the nation’s largest auto club.

The so-called underemployment rate, which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking, decreased to 14.5 percent from 14.9 percent.

Bernanke, in a speech to economists on March 26, said the employment gains have been a “welcome development. Still, conditions remain far from normal, as shown, for example, by the high level of long-term unemployment and the fact that jobs and hours worked remain well below pre-crisis peaks.”

“We cannot yet be sure that the recent pace of improvement in the labor market will be sustained,” Bernanke said, adding he was particularly concerned about the number people out of work for six months or longer.

The report also showed a decrease in long-term unemployed Americans. The number of people unemployed for 27 weeks or more eased as a percentage of all jobless, to 42.5 percent from 42.6 percent.

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