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Job Numbers: 'One Month Does Not Make A Trend'

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Just when it seemed to be gaining steam, the U.S. job market pretty much stalled in March. Employers added a net 120,000 jobs during the month, defying the higher expectations of a lot of economists. And though the unemployment rate fell, it did so for the wrong reasons.

Over the past few months, the economy has been adding jobs at a good, if not spectacular, pace, and all the signs suggested that trend had continued through March. As it happened, jobs increased at a rate that barely keeps up with population growth.

"So the good news is that private businesses continue to generate jobs," says Ward McCarthy, chief financial economist at Jefferies & Co. "However, they generated these jobs at a much slower pace than they had in the prior three months."

Delving deeper into the data reveals some disturbing numbers. The number of temporary workers, often a barometer of job growth, fell. So did another economic gauge, the length of the average workweek. Even the good news in the report was, on second glance, not as positive as it appeared.

Unemployment fell from 8.3 percent to 8.2 percent, "but it happened for reasons that are not so good," McCarthy says. "Specifically, it happened because a lot of frustrated people dropped out of the labor force."

That is, people who wanted jobs have grown so discouraged that they've stopped looking — which causes the unemployment rate to fall.

The weak job market was in some ways at odds with other recently released data. The number of first-time unemployment claims has been falling and reached a four-year low this week. The outplacement firm Challenger, Gray and Christmas says layoffs have dropped a lot. Labor economist Heidi Shierholz of the Economic Policy Institute says in the face of such data, the sudden drop-off in job creation is puzzling.

"When you look out into the economy, look at the other indicators we have, I don't see anything that suggests that the growth rate should have dropped by 50 percent," she says.

Shierholz says the drop could have been weather-related. It was so warm this winter that seasonal employers like construction companies may have simply moved up their hiring. So the jobs normally created in March were created in January and February instead. Shierholz says last month's decline could end up being an aberration.

"This report underscores the message we should always keep in mind that there's months and months of variability in these numbers. One month does not make a trend. We really should not freak out that we are entering a slog again," she says.

Whatever the case, Friday's report came as something of a rude surprise, slamming the brakes on hopes that the U.S. economy is recovering. So often since the financial crisis, unemployment has proved to be a stubborn foe — more relentless than anyone thought. This most recent report suggests it still hasn't been fully licked.

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