Weaker than expected March job gains are the latest in a string of lackluster economic data caused by a combination of the cold weather, the strong dollar and the decline in the price of oil. The balance of these factors remains to be seen, so while the report may give the Federal Reserve another reason to keep interest rates low past June what happens beyond that date is still unclear.
Employers added 126,000 jobs in March, according to the latest payroll report from the Bureau of Labor Statistics. Out Friday morning the figure is the weakest since December 2013 and far lower than the 250,000 new jobs economists were forecasting.
The unemployment rate, which is drawn from a different survey of households, was steady at 5.5%. This remains the lowest rate since May 2008.
“I was better at 8:29,” said Luke Tilley, Chief Economist at Wilmington Trust, at the start of an interview regarding the release which was out at 8:30 a.m. “The main punch line is that it is a disappointing number but it bring jobs data more in line with the other economic data we have been seeing over the course of the winter.” Durable goods, retail sales and the ISM Manufacturing Index have all pointed to a weak season while jobs data had remained strong. This report changes that disconnect, especially in light of downward revisions to the previous two months.
The February payroll count was revised down Friday to 264,000 after initially coming in at 295,000. The January figure was down at plus 201,000 jobs from the most recent reading of 239,000. Total employment gains in January and February were therefore 69,000 lower than what BLS previously reported.
Some of the first quarter slow down is likely weather related. Last year’s crummy Q1 has largely been written off as a result of the severe cold and snow similar to condition the northeast experienced again this year. However, a look at where job growth is slowing, or even declining, suggests there may be more at play.
Employment was up in professional and business services, health care and retail trade. Employment in mining declined 11,000 jobs thanks to the drop in oil prices. Even in the sectors where jobs were added it was at a much slower rate than the average for the prior 12-months. Tilley pointed out that manufacturing has languished for two months in a row thanks to the strong dollar. Large multinational firms have pointed to dollar strength as an earnings headwind, cutting into the profit they bring home from abroad. The trend can also make it more likely that buyers will go to cheaper international options.
So what does all of this mean for the Federal Reserve and the pace of rate hikes?
This may lower the chances an initial hike will come in June, the first date the Fed says it will consider moving. Jobs data had been the bright spot among the many inputs tracked by the central bank. An off trend jobs report can give the Fed another reason to keep rates low, or soften their argument for pushing ahead sooner rather than later. Either way, the Fed will likely write this report off as transitory at least at first. However, “everything is temporary until it is permanent,” pointed out Bankrate.com’s Mark Hamrick.
Other key figures from Friday’s report include —
Currently 148.3 million Americans are employed. At 8.6 million there are 1.8 million less unemployed people today than there were a year ago.
In March average hourly earnings rose by 7 cents to $24.86. The 12-month wage growth rate ticked up to 2.1%. Pre-crisis annual wage growth was north of 3%. Average hourly earnings for private-sector production and nonsupervisory employees rose by 4 cents to $20.86 in March.
The labor force participation rate ticked lower to 62.7% from 62.8%, this rate has been remained in a narrow 62.7% to 62.9% range since last April. The employment-population ratio was 59.3% for the third month in a row.
