Payrolls surprised to the downside in March as employers added only 120,000 jobs on net, well below the almost 250,000 average monthly gains of the past three months and the smallest net gain since last October. While the unemployment rate ticked down a tenth to 8.2%, that was partly driven by a decline in the labor force (though this number is quite volatile month-to-month). Weekly hours slid a bit as well, another indicator of a dip in labor demand off of the recent trend.
The question, of course, is does this weaker report signal a true downshift in job growth, suggesting the recent acceleration was yet another false start. Since one month does not a trend make, this in unknowable, but some indicators suggest March’s slowdown may be anomalous. Most industries added jobs last month, though retail trade was a big exception, down 34,000.
Seasonality could be playing a role in the disappointing March results. This past winter was the fourth warmest on record, but how does that play out in the jobs report? Retail trade provides a useful example. Stores that expect less traffic in cold months will downsize their staffs in the winter and boost hiring in the spring. Thus, the seasonal adjusters will add employment to the non-seasonal retail count in the winter and subtract it in the spring.
But in an unseasonably warm winter, stores will move their spring hiring up a few months—folks who would have been hired in March were instead hired in Jan or Feb. In that case, the seasonal adjustment artificially boosts the earlier months and lowers the count for March.
The best way to control for that possibility is to average over the past three months. Given that March data completes the first quarter of the year, average monthly growth in this quarter was 212,000 per month, compared to 164,000 per month in the prior quarter (2011q4). So, smoothing out possible anomalies, we still see a clear acceleration in job growth.
Seasonals may be playing a role, or we may be looking at the beginning of yet another slowdown in employment gains. If so, theories that the US economy is finally entering a self-sustaining recovery will have to once again be put on hold.