Job market: bad to worse
Job market: bad to worse
Untitled DocumentJob market goes from bad to worse
The March employment report released this morning was anything but pretty. The unemployment rate increased from 4.8 percent to 5.1 percent, which isn’t unexpected at all. But more troubling is the fact that we’ve now seen three straight months of job losses. Last month, when we were at two in a row, was enough to convince me we are currently in a recession. The news was even worse this time around.
In March, payrolls shrank by 80,000 jobs. The two preceding reports for February and January were revised lower, from 63,000 job losses in February and 22,000 job losses in January to a loss of 76,000 jobs in EACH month. So the job losses for the first two months of the year double and the initial March reading showed even more job losses.
Employment is often a lagging indicator as in times of economic uncertainty, employers begin by holding off on hiring before they actually start to eliminate jobs. So what starts as weak job growth becomes a shrinking payroll when an economy is in or close to a recession. On the other side, as the economy emerges from recession, the labor market continues to be a lagging indicator. As the economy shows signs of a revival, employers are typically reluctant to add to payrolls, instead holding out to make sure the economic recovery is for real. Only when convinced that the economy and business prospects have improved will employers feel comfortable going out on a limb and adding headcount.
So does the employment report tell us anything we didn’t already know? Not really. It should confirm to even the most optimistic (and I’m generally in that camp) that we are in a recession whether or not we’ve met the technical definition. The stock market won’t like it, the bond market will, and it probably doesn’t surprise the Fed too much given Chairman Ben Bernanke’s sober economic assessment earlier this week. It adds some heft to the argument that the Fed will cut rates, and perhaps by one-half point when they meet again at month-end. But that is light years away in terms of economic data and the daily events that could occur as a result of the lingering credit crunch. We’ll have plenty of time to dissect the Fed’s next move as the month unfolds.