416,000 Jobs Created in U.S. During March
Although the unemployment rate remained unchanged at 4.1%, the U.S. economy generated 416,000 jobs last month, the Labor Department said Friday--more than in any month since February 1996.
But analysts attributed much of the increase not to an overheating economy but to warm weather, a quirk of the calendar and other noneconomic factors.
Private forecasts had called for the unemployment rate to fall slightly to 4%, and some interpreted the unchanged rate as a sign that the economy might even be slowing slightly, just as Federal Reserve Chairman Alan Greenspan wants.
Because the March data were unusually tainted by one-time statistical factors, it will take at least another month’s data to be sure which view is right.
“The employment report was strong,” said Kenneth Mayland, president of ClearView Economics, a Cleveland consulting firm. “We got a hefty rise in payrolls, which will sustain further increases in consumer spending. But when you cut through the numbers, it wasn’t as strong as it could have been.”
The biggest distortion in the March jobs data was caused by the Census Bureau, which hired 117,000 temporary workers that month. This artificial boost was relatively easy to measure and remove from the count, leaving a healthy 299,000 jobs created elsewhere in the economy. Warm winter weather also appears to have bolstered job creation.
Far more difficult to measure and adjust away, however, was an unusual “calendar effect,” which is believed to have added tens of thousands of jobs to the March tally. Because the government’s February-to-March cut-off date fell on a weekend, the effect was to give the March survey period a fifth week.
Because such a fifth week appears only once every 28 years, the government doesn’t have enough data to adjust for the extra week, said Bureau of Labor Statistics Commissioner Katharine G. Abraham. Estimates of how much this inflated the job growth range from 50,000 to 100,000, enough of a swing to explain the disagreements over what the March numbers said about the economy.
Steven A. Wood, senior economist at Banc of America Securities in San Francisco, sees hints in the employment numbers that the Fed’s recent series of interest-rate increases may finally be having an effect.
The latest report showed renewed weakness in the manufacturing sector, for one thing. Manufacturing employment was beginning to stabilize in recent months, after years of massive job losses, but in March the bleeding resumed. Factory employment was down by 5,000 jobs, Labor reported, and apparently would have been off by a full 20,000 jobs if a strike at Boeing hadn’t ended.
In addition, factory workers spent slightly fewer hours at their jobs in March, the Labor Department reported--a hint that overtime isn’t as plentiful as before. The Labor Department also revised the number of jobs created in February downward to a minuscule 7,000.
Wood noted that the weakness in manufacturing coincides with a slowdown in the housing sector--one of the first parts of the economy to respond when interest rates rise. Though housing still looks strong overall, single-family new-home construction has tapered off in recent weeks, as have sales of new and existing single-family homes.
“I think we’re beginning to see scattered signs that the slowdown that the Federal Reserve is trying to engineer is coming about,” Wood said.
Others, however, are less struck by possible signs of economic weakness than by the economy’s ability to go on creating hundreds of thousands of jobs, month after month.
“You may be able to slow down one sector of the economy, but the problem is, the services sector added 150,000 jobs,” said Rajheev Dhawan, director of econometric forecasting at the UCLA Anderson Forecasting Project.
Manufacturing counts for just 15% to 18% of economic activity, he said, while services now account for about 60%. So if services continue to grow, the slowdown in the manufacturing sector won’t have much overall negative impact.
Dhawan said it will take a major stock market decline to slow the economy, adding, “These puny little rate hikes, 25 basis points here, 25 basis points there, they aren’t going to do anything to slow this juggernaut.”
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U.S. Unemployment
Percentage of U.S. work force not employed, seasonally adjusted:
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March: 4.1%
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Source: Labor Department
