Analysis: March 2011 BLS Jobs Report

The US unemployment rate held steady at 8.3%, marking the sixth consecutive monthly decline; the broader underutilization rate decreased to 14.9% (from 15.1%).

• A net +227k jobs were created in February, well above consensus estimates of +210k; December and January jobs figures were also revised upwards (+60k in total); the three month moving average now sits at +245k.
• The total number of unemployed (12.8M) and long-term unemployed - those out of work for 6+ months (5.4M or 42.6%), remained flat.
• The labor participation rate increased to 63.9% (from 63.7%), highlighting the fact that more discouraged workers are re-entering the workforce. Note: As more discouraged workers return from the sidelines, the unemployment rate may increase or hold steady (like in February) if job creation can't offset the numbers.

Lots to be excited about...

• Job growth remained widespread: professional and business services (+82k; +45k in temp help services - a leading indicator of full time hiring), healthcare (+61k), leisure and hospitality (+44k) and mining (+7k) all experienced sizable gains.
• Construction (-13k), retail (-7k; -1.6k within clothing stores) and government (-6k; however, the rate of job loss within the public sector continues to decrease) all pared payrolls.
• Quite interestingly, increases in manufacturing jobs (+31k) highlight improving consumer demand. Subsequently, this is generating positive benefits further down the supply chain: transportation and warehousing (+10.6k) and wholesale trade (+8.4k).

What’s in store? Key watch items…
On the bearish side:

• Economic engines running out of gas? China and India's economies, two important global catalysts for growth, are slowing down with both governments expecting lower growth in 2012 (7.5% and 6.9% respectively…vs. 9+% growth in previous years). Their slowdowns are taking a toll (e.g., during Q411, EU businesses suffered their first drop in exports in 2.5 years leading to a -0.3% decrease in Q4 GDP and a humbling 0.7% GDP increase in 2011).
• Cheap money. The Fed's efforts to lift the US economy from the ashes (via its loose monetary policy) has contributed to a weaker dollar. While a weaker dollar is good for exports and GDP, it raises the price of imports (e.g., gasoline). While the Fed maintains its position of holding interests near zero until 2014, one has to be concerned about the longer-term impact on consumer demand.

On the bullish side:

• More money in US consumers' pockets. The cost of labor for non-farm businesses rose to 2.8% in Q411, higher than the 1.2% expected increase. Higher labor costs underscore the improving job market which is allowing workers to command better pay.
• EU feeling better. According to the European Commission, businesses and consumers in the Euro zone are feeling more optimistic about their economic prospects as evident by a second consecutive monthly increase in the EU's Economic Sentiment Indicator to 94.4 (vs. 93.4 in January). While this is still well off the long-term ESI average of 100, it was the highest reading since October 2011.