U.S. Job Growth in March Posts Robust Rebound
The U.S. economy caught forecasters by surprise and shook up the presidential campaign by adding a net 308,000 jobs last month, triple the expected number and the largest monthly increase in nearly four years.
Together with upwardly revised figures for January and February, the jobs numbers released Friday by the Labor Department portrayed an economy that is finally beginning to put people back to work, rather than -- as many economists had feared -- boosting growth and profits but not employment.
Even the tenth of a point rise in the March unemployment rate to 5.7% appeared to be a sign of strength. During the month, nearly 200,000 people who had previously given up looking for work flooded back into the labor force in search of jobs.
The sense of relief was palpable at the White House, where President Bush has been under attack for the weak job creation during his term of office. The president gave a thumbs-up gesture when asked about the March employment figures as he walked to his helicopter en route to West Virginia. He later told an audience in Huntington, W.Va., that “the economy is strong. It’s getting stronger.”
Bush’s presumed Democratic challenger, Sen. John F. Kerry of Massachusetts, issued a statement saying that “after three years of punishing job losses, the one-month job creation ... is welcome news for America’s workers.” But Kerry added that “for too many families, living through the worst job recovery since the Great Depression has been ... far too painful.”
Labor Department officials and federal regulators said late Friday that they were examining evidence of unusual bond, currency and stock trading just before the 8:30 a.m. Eastern time release of the employment data, which could indicate a leak. Investors reacted predictably to the new jobs figures, driving up the prices of stocks, which benefit from growth, and pushing down the price of bonds, whose value can be hurt if growth sparks inflation.
To be sure, the economy has a substantial way to go to replace the net 2.5 million private-sector jobs lost since the president’s arrival in office in January 2001, about 560,000 of which were lost since the start of the recovery in November of that year.
In addition, the latest employment report included hints that not all may yet be right with the nation’s labor market. Among other measures, March’s job gains were accompanied by an unexpected six-minute decline in the average workweek.
“It used to be when jobs went up, so did the workweek,” said Jose A. Rasco, a senior economist with Merrill Lynch in New York. “It’s a little weird.”
Nevertheless, the size of the March jobs gain, the fact it was spread across virtually every industry and the accompaniment of upward revisions in previous months’ figures suggest that the economy is in substantially better shape than previously thought. Labor officials nearly doubled their combined payroll gain figures for January and February to 205,000, up from an initial estimate of 118,000.
Some analysts said the latest numbers showed that the worst fears about a punishing new labor market, winnowed by computer-driven productivity gains and a ceaseless exodus of jobs offshore, have been overblown. They said the return of job growth, though painfully slow in coming, is finally falling into line with past comebacks.
“What we’re seeing is a more standard labor market response to a pronounced pickup in GDP growth that began last year,” said Peter E. Kretzmer, a senior economist with Bank of America in New York, referring to gross domestic product.
“A year from now, we won’t be talking about whether there was something unusual about the labor market,” he predicted, “but whether anything special happened to productivity.”
Analysts have repeatedly pointed to dramatic jumps in productivity, or output per worker, to explain how the economy could be growing and companies could be meeting increased demand for goods and services without adding workers. Some have suggested that the process could continue almost indefinitely. That raised fears that the traditional link between jobs and economic growth had been broken and that people who have lost their jobs would find it extremely difficult to land new work.
But if the March job total is correct, companies have finally reached the point where they can no longer depend on productivity increases and must resume hiring.
If revisions of past months’ figures are right, productivity growth may not have been quite as stunning as initially thought. Because more people are working than early estimates showed, output per worker must be lower than those estimates suggested.
Even if the latest employment figures mark an economic turning point and suggest that apprehension about a weakening labor market may be unfounded, they still show the damage the long jobs drought has wrought:
* Labor force participation -- the fraction of Americans either working or looking for work -- remained at a near-16-year low in March, as many potential workers remained on the sidelines.
* Nearly 1 in 4 unemployed workers -- 23.9% -- has been out for six months or more, a 20-year high. The situation of the long-term jobless has grown considerably more difficult since the White House and Congress discontinued federal extended benefits at the turn of the year. The extended program offered up to 13 weeks of cash assistance, supplementing the regular six months of state-provided jobless compensation.
* Average hourly earnings for production and non-supervisory workers, who make up three-quarters of the workforce, rose a mere 2 cents to $15.54. Combined with the decline in working hours, the result was an increase in average weekly earnings of only 1.5%, which barely matched the inflation rate.
Analysts said the March employment numbers probably overstated the strength of the nation’s labor market. Part of the jump in jobs was due to the rehiring of 13,000 California grocery workers at the end of their long labor dispute with store owners. And part was the result of a larger-than-normal net gain of 71,000 jobs in construction to make up for weather-related hiring delays in February.
In addition, the latest numbers showed that not all parts of the economy enjoyed an employment bounce-back. Despite a string of surveys suggesting that the nation’s long-suffering manufacturers were staging a comeback, new factory jobs failed to materialize in March. Manufacturing employment was flat, a big improvement from 43 straight months of job losses but not the recovery many had predicted.
The unemployment rate for African Americans rose four-tenths of a point to 10.2%. The rate for Latinos was unchanged at 7.4%. The rate for whites rose two-tenths of a point to 5.1%.
“If you look just below the surface, the March jobs report is not as rosy as it seems,” said Arloc Sherman, a researcher with the liberal Center on Budget and Policy Priorities in Washington.
Still, the new employment report shows that the economy has added a net 513,000 jobs since the start of the year. Although not sizzling by historical standards, it is the strongest job performance since the second quarter of 2000, when the boom of the 1990s had just crested and was starting to sink.
And it means the economy is adding jobs at a pace of about 171,000 a month, or about the rate that analysts say is necessary to absorb new workers and keep the unemployment rate from rising.
While the latest employment report reverberated through the political world Friday, its most immediate effect in the economic realm was to shift the focus of analysts’ worries from jobs to interest rates.
The Federal Reserve has kept its signal-sending federal funds rate, the interest that banks charge each other for short-term loans, at near-record lows for more than two years, largely out of concern that weak jobs growth could threaten the economy’s recovery. Until Friday, many analysts believed that the Fed would leave the rate at its current 1% through the end of the year.
But with new evidence that the job market is finally reviving, Fed watchers have begun to warn that the central bank is likely to raise rates perhaps as early as June.
Already Friday, market-set rates were climbing in anticipation of Fed action in a move that is certain to push up the cost of mortgages, corporate borrowing and other types of borrowing.
