Don't Be Fooled by Weak US Job Numbers in March

It seems like every twist and turn in the US employment data is being observed under a microscope. But don’t let the weak job numbers in March fool you—the underlying trends still point to continued improvements on the employment front.

In March, payroll employment rose 120,000, while the jobless rate fell 0.1 points to 8.2%, according to data from the Bureau of Labor Statistics released on April 6. The muted improvement raised concerns that the labor market might be backsliding after a solid run of gains. I don’t think that’s the right conclusion, for a few reasons.

First, this was just the initial report for March, and we have seen a series of upward revisions to payroll data over the past several months. When you look at more comprehensive reports the scope for more revisions is clear. The Quarterly Census Employment and Wages (QCEW) report for the third quarter of 2011, which was released on March 28, shows that even after revisions, there was a substantial undercount of jobs, hours, wages and income.

Second, it's too early to conclude that the smaller gains in March were the result of a weather-related boost to job creation in the previous months. However, even if job growth in March was dampened a bit by the strong results of the previous months, that doesn’t mean the gains in jobs, work hours and wages in January and February were any less important. You have to look at the entire quarter in order to get a perspective on what’s going on. I think the initial results are impressive and point to improving underlying trends.

For example, the payroll job gain of 635,000 in the first quarter was the best since the first quarter of 2006, and the 1.345 million gain in household employment was the best since the first quarter of 2000. Hours worked expanded at an annualized rate of 4.1%, the third-largest gain in the past 14 years. And the unemployment rate fell 0.3 points during the period to 8.2%—the lowest rate since January 2009.

Third, if the US economy were entering a weakening phase, it would show in demand and order flow well before showing in the jobs data. I’m not seeing that at all. Retail sales are picking up. Auto sales are booming. And the Institute for Supply Management’s manufacturing and non-manufacturing orders indices for March point to ongoing gains after a strong February.

Taken together, I think the evidence supporting a solid and steady recovery of the US job market clearly outweighs a single month in March. Of course, we can’t avoid looking at monthly data, but we can avoid reading too much into it.

The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AllianceBernstein portfolio-management teams.

Joseph G. Carson

Director—Global Economic Research
Joseph G. Carson joined the firm in 2001. He oversees the Economic Analysis team for Fixed Income and has primary responsibility for the economic and interest-rate analysis of the US. Previously, Carson was chief economist of the Americas for UBS Warburg, where he was primarily responsible for forecasting the US economy and interest rates. From 1996 to 1999, he was chief US economist at Deutsche Bank. While there, Carson was named to the Institutional Investor’s All-Star Team for Fixed Income. He began his professional career in 1977 as a staff economist for the chief economist’s office in the US Department of Commerce, where he was designated the department’s representative at the Council on Wage and Price Stability during President Carter’s voluntary wage and price guidelines program. In 1979, Carson joined General Motors as an analyst. He held a variety of roles at GM, including chief forecaster for North America and chief analyst in charge of production recommendations for the Truck Group. From 1981 to 1986, Carson served as vice president and senior economist for the Capital Markets Economics Group at Merrill Lynch. In 1986, he joined Chemical Bank; he later became its chief economist. From 1992 to 1996, Carson served as chief economist at Dean Witter, where he sat on the investment-policy and stock-selection committees. He received his BA and MA from Youngstown State University and did his PhD coursework at George Washington University. Location: New York

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