Nonfarm Payrolls Increased 126,000 in March
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Implications: This data was released on Good Friday, when markets were closed, but it didn't stop the pessimists from over-reacting. There's little doubt that job creation was slower in March, with nonfarm payrolls increasing only 126,000 and revised down for prior months. Meanwhile, civilian employment, an alternative measure of jobs that includes small business start-ups, increased a weak 34,000. But, it's only one month, just like the payroll increase of 423,000 back in November was only one month. In the past six months – so including last month's slowdown – payrolls are up 261,000 per month, the exact same as in the prior six month period. So what we have here is normal volatility around a trend, not something to get worried about. If anything, we should be surprised job growth has held up so well in the past six months, given unusually bad winter weather, west coast port strikes that led to parts shortages, and the steep drop in energy prices. Mining payrolls fell 11,000 in March and are down 30,000 since the start of the year. The other bad news for March is that the labor force participation rate slipped back down to 62.7%, tying the lowest level since the late 1970s. In addition, total hours worked declined 0.2% as firms shortened the workweek to an average of 34.5 hours per worker from 34.6. But the report from Friday also had some good news. Average hourly earnings increased 0.3% in March and, as a result, total cash earnings are up 4.9% from a year ago, which means consumers have plenty of fuel to increase spending. In addition, the median duration of unemployment fell to 12.2 weeks, the lowest so far in the recovery. We do not agree with the view that Friday's report eases pressure on the Federal Reserve to start raising short-term interest rates. We will get two more employment reports before the Fed's June meeting and we expect job creation to be back up around the trend of the past year, while the unemployment rate continues to edge down and wage growth shows more signs of acceleration. These are not reasons for delaying rate hikes.

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Posted on Monday, April 6, 2015 @ 10:01 AM

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