U.S. Markets close in 4 hrs 17 mins

Jobs Report: The Beginning of a Disappointing Trend?

It's a good thing the stock market isn't open Friday. If it were, the disappointing March employment report, a rare piece of negative economic news this spring, would likely have caused stocks to nosedive. As it was, U.S. stock futures (which were open) slipped, the dollar is falling and Treasury prices are spiking on the report.

The Bureau of Labor Statistics said the U.S. economy added only 120,000 payroll jobs in March, a sharp decline from recent jobs growth. The unemployment rate slipped to 8.2 percent from 8.3 percent in February, but that's largely because the workforce declined. In short, this is the type of report that is more typical of an economy beginning to emerge from recession than one that has been growing for nearly three years.

The addition of 120,000 jobs represents the 15th straight month in which jobs were added. Compared with March 2011, there were 1.9 million more payroll jobs in the U.S. in March 2012. But this represents a sharp slowdown from the pace of job creation. In each of the previous three months, the economy had added more than 200,000 positions. As is typical, the Bureau of Labor Statistics also revised the job creation for previously reported months. The January figure was revised from a gain of 284,000 to a gain of 275,000, while the February figure was revised up from 227,000 jobs created to 240,000. Looking back, BLS discovered an extra 4,000 jobs that it hadn't detected last month — a negligible figure.

The unemployment rate continued its decline, falling from 8.3 percent in February to 8.2 percent in March. But that's not necessarily good news. BLS creates its jobs metrics through two surveys. In the establishment survey, it calls up companies and asks them how many people they employ. This survey produces the payroll jobs figure. In the household survey, it calls up people at home and asks them about their work situation — whether they're working, whether they are looking for work, or whether they have stopped looking and are no longer in the labor force. The results of this survey produce the unemployment rate. And in March, the labor force actually shrank by 164,000. The labor force participation rate fell from 63.9 percent in February to 63.8 percent in March. That's why the unemployment rate fell.

Where were jobs created in March? Manufacturing had a strong month, adding 37,000 positions. Gains were also seen in professional and business services (31,000), health care (26,000), and food services and drinking establishments (37,000). There was significant weakness in retail, which lost 34,000 positions in March. Average hourly wages bumped up a bit, but because the average number of hours worked fell in the month, average weekly wages fell as well.

And in March, as it has for the last two years, what I've dubbed the "conservative recovery" continued. For much of the past two years, the private sector has consistently added jobs while the public sector — federal, state and local government — has consistently cut them. That trend continues in March, though there are signs that austerity's effect on public sector jobs is waning. In March, government reduced employment by 1,000. Since May 2010, government employment has fallen by one million while the private sector has added 3.7 million jobs.

All in all, this was a disappointing report that was at odds with the prevailing data flow. Other labor market indicators have been trending in a more positive direction. Weekly first time unemployment claims are at a four-year low. In March, layoff announcements fell sharply from the previous month. At the end of January, there were 3.46 million job openings in the U.S., up 21 percent from the number of openings in January 2011. Ultimately, however, the monthly payroll jobs figure is the one that matters most — for the economy at large, and for the politicians whose electoral success will depend in large measure on the payroll jobs figures for the next several months. We'll have to wait 30 days to see if March's report was an anomaly or the beginning of a new, disappointing trend.

Daniel Gross is economics editor at Yahoo! Finance.

Follow him on Twitter @grossdm; email him at grossdaniel11@yahoo.com.