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The US March Jobs Report, What Seems Good is Just OK

Posted by Joseph Trevisani on Apr 4, 2014 5:18:00 PM

American firms added the expected number of jobs in March but the looked for bonus from weather suspended hiring in January and February was nowhere to be found.

 Non-farm payrolls rose 192,000 for the month and revisions to January and February added another 37,000. Economists had forecast 200,000 new hires. 

The unemployment rate or U-3 was unchanged at 6.7 as predicted. The underemployment or U-6 rate, climbed to 12.7 percent in March from 12.6 percent the prior month. This measure includes those wanting work but not actively searching. The more commonly quoted U-3 rate requires that an individual have searched for work in the prior month to be counted as unemployed. The labor force participation rate gained 0.2 percent to 63.2 percent, remaining just above the generational low of 62.8 percent in December.

The three month moving average for payrolls moved up to 178,000 from 142,000 in February, which had been dragged down by December’s 84,000 result.

Payrolls have been very consistent over the past three years. In the year to March an average of 184,000 jobs were created each month. Over the prior two years the average is 181,000 and for the past three years the average is 188,000. There is no indication of acceleration in labor market hiring in the recent figures.

Manufacturing payrolls unexpectedly dropped 1,000 though they had been forecast to rise 7,000. The February factory payrolls jumped 13,000 upon revision to 19,000.

Average hourly earnings were flat for the month, below the 0.2 percent forecast; February was unaltered at 0.4 percent. Annual gains were limited to 2.1 percent in March, less than the 2.3 percent prediction and February's 2.2 percent gain.

Over the past four years the annual gain in wages has been remarkably stable. In 2010 it averaged 1.8 percent, in 2011 2.0 percent, in 2012 1.9 percent and last year 2.1 percent, a four year average of 1.9 percent.  Over that same period consumer inflation averaged 2.1 percent annually.

With wage gains in the past four years slightly less than inflation, the consumer has seen no increase in purchasing power; it has declined slightly.

The average hourly earnings series from the Bureau of Labor Statistics quoted above only goes back to April 2006.

A comparison of similar annual personal income figures from the Bureau of Economic Analysis show a decided decline in income in the 2010 -2013 period compared to the years prior to 2008. From January 2010 to December 2013 the annual increase in personal income averaged 4.0 percent, with inflation averaging 2.1 percent in those four years; the consumer gained 1.9 percent in purchasing power each year.

In the two decades from 1988 to 2007 income rose an annual clip of 5.7 percent, inflation in that same period averaged 3.1 percent per year.  Consumer purchasing power increased an average of 2.6 percent annually. 

The 0.7 percent difference in purchasing power between the two periods is enough to provide a substantial fillip to GDP growth.

Household employment rose 476, 00 in March more than double the 210,000 forecast.  February's 42,000 gain was unrevised.

Joseph Trevisani

Chief Market Strategist

WorldWideMarkets Online Trading

Charts: Bloomberg

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