Economic Notes: One Cheer for Jobs
4/05/2010
By Patrick O'Keefe, Director of Economic Research, J.H. Cohn
Employment
rose in March for the third time in five months, up 162,000 jobs – the largest increase since March 2007 according to the Bureau of Labor Statistics.
While welcome, the report merits only one cheer – and a quiet one at that – because the gains, while broad, were shallow and disproportionately temporary. Specifically:
Although the rate of unemployment remained steady, the number of unemployed rose in March as an increasing number of previously discouraged jobseekers resumed their job search in response to generally improving economic conditions. This suggests growing optimism in the household sector.
Manufacturing’s employment gains (+0.4% from its nadir in December) should accelerate as the nation’s factories continue to fuel growth in the general economy. February’s new orders were 10.5% higher than a year ago and look to rise faster in the coming months according to the Institute for Supply Management. With inventories drawn down and plant and equipment utilization rising, it is only a matter of time before producers ramp up their hiring.
The outlook for construction jobs is not similarly bright, however. Homebuilding remains moribund; new home sales fell to a historic low in February. And nonresidential construction continues to deteriorate due to high vacancy rates and lingering financial difficulties, especially in commercial properties (i.e., office, retail, and lodging). As a consequence, construction spending will continue to decline.
While manufacturing’s gains should offset construction’s continued weakness, the net effect will be limited. Combined the goods producing sectors provide fewer than one-sixth of the nation’s jobs.
Private service providers, on the other hand, account for upwards of two-thirds of total employment. While not immune to the recession, service sector jobs were more resilient and began expanding earlier than did goods producers.
And the service sector’s recovery is broadening. Since October, steady growth in recession-resistant health and education employment has been supplemented by an 11.8% increase in temporary help employment. And March saw a pick-up in hiring in the merchant sphere (retail and wholesale trade and transportation).
Increased household income is bolstering consumer spending on services, a trend that will translate into more rapid hiring in the jobs rich service sectors over the course of the year.
Despite the largest monthly gain in three years, there are still 8.2 million (5.9%) fewer jobs nationwide than at the beginning of the recession. March’s employment increase was positive, but minor (+0.1%). It was, in other words, a one-cheer event.
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The statements, opinions, and conclusions contained herein are based solely upon the author’s own studies, research, and personal experience. Neither J.H. Cohn LLP nor the author makes any representation or warranty as to the accuracy or completeness of this information. J.H. Cohn LLP and the author expressly disclaim any liability for any loss or damage which may be incurred, of any kind whatsoever, as a result of or arising from the use of any of the information contained herein or reliance on the accuracy or completeness of it.