The U.S. economy generated 88,000 new jobs in March – far below the consensus estimate of 200,000 – and the smallest gain in 10 months. The unemployment rate dropped to 7.6% from 7.7.% -- the lowest rate since December 2008. The federal government and retailers trimmed their payrolls last month while the health care and business and professional services industries added. The labor participation rate fell to 63.3% in March, its lowest level since 1979. The low participation rate undermined the "good news" of a falling jobless rate.
Heather Boushey, chief economist at the Center for American Progress, said the weak jobs report was a direct reflection of the sequester.
“Sharp cuts in government spending implemented March 1 are only beginning to show their ugly consequences,” Boushey wrote in a report. “Government cutbacks have already been slowing growth and are now actively pulling employment downward, but the worst may be yet to come. While it’s too early to know what the full impact will be on the unemployment rate, government spending cuts are stealing wind from the sails of the recovery.”
Bob Brusca, chief economist of FAO Economics, says in an interview with The Daily Ticker that economists should digest the jobs report before making any harsh economic predictions.
“88,000 is an unequivocally bad number for the month” but “it’s also the most unreliable,” Brusca notes. “This number will be revised up, don’t worry.”
Consumer confidence may continue its descent as a result of the March jobs report but Brusca argues that recession calls are still premature.
“Recession could be where we’re headed but it’s too soon now to tell,” he adds.
The Federal Reserve has said it would continue its $85 billion bond-buying program until the economy improves. It has been criticized for keeping short-term interest rates near zero but Fed Chairman Ben Bernanke has insisted that rates will remain low until the national unemployment level hits 6.5%.
The Bureau of Labor Statistics also reported that the average workweek in March rose 0.1 hour to 34.6, indicative that workers were putting in more overtime. The February jobs report was revised up to 268,000 from 236,00. The number of new jobs created in January was revised up to 148,000 from 119,000.
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