The US unemployment rate decreased to 8.2%; the broader underutilization rate decreased to 14.5% (from 14.9%).
• A net +120k jobs were created in March, significantly below consensus estimates of +203k, tempering recent exuberance that the US labor market has finally shaken its recessionary doldrums. Note: The US has regained only 3.9M of the 8.8M private sector jobs lost during the downturn.
• The total number of unemployed (12.7M) and long-term unemployed – those out of work for 6+ months (5.3M or 42.5%), decreased slightly. Note: Underemployment has decreased from 17.2% to 14.5% over the last 2.5 years.
• The labor participation rate decreased to 63.8% (from 63.9%), contributing to the unemployment rate decrease despite less than stellar job gains.
Still reason to be optimistic...
• Increases in manufacturing (+37k) and various service sectors – leisure and hospitality (+37k), healthcare (+26k) and professional and business services (+31k) – highlight continued consumer and business demand.
• Among the laggards, retail (-34k; flat within clothing stores), temp help services (-7.5k), construction (-7k), and government (-1k) were among the notable sectors that experienced decreases.
• Future employment reports will shed light if March was a blip or the start of another market slowdown. Note: One bearish theory is the relatively mild winter pulled job creation (that usually takes place during the Spring) forward; future job growth won’t be as great as previous months.
What’s in store? Key watch items…
On the bearish side:
• Europe. According to Markit Economics’, Euro zone business activity decreased to 49.1 in March from 49.3 in February (Note: Readings below 50 signify economic contraction). Moreover, Eurostat’s indication of a 0.1% decrease in retail sales underscores consumer wariness and the effects of government austerity programs. While EU GDP contracted 0.3% in Q411, S&P expects Euro zone’s recession to continue through September with a potential 2.5% drop in GDP during that timeframe.
• Voluntary turnover. While the March report highlights fewer job losers, ‘job leavers’ continued to trend upwards (1.1M in March vs. 0.9M a year ago), highlighting a potential shift to a ‘talent seller’s’ market.
On the bullish side:
• US consumer sentiment. Consumer spending increased 0.8% in February, the biggest monthly increase since last July. While the spending increase wasn’t accompanied by wage and salary income growth, this trend in conjunction with a drop in the savings rate to 3.7% (vs. 4.3% in January) highlights improving consumer confidence. Note: Consumer spending accounts for approximately 2/3 of economic demand.
• Signs of better things to come? With initial claims for unemployment benefits (357k; lowest since April 2008) and planned layoffs (the lowest level in 10 months according to Challenger, Gray & Christmas) both experiencing recent lows, these readings may signal continued improvements for the US labor market.
On the ‘somewhere in between’ side:
• Playing without a safety net? Given recent comments by Central Bank Leaders Bernanke and Draghi, it appears that efforts to prop up financial markets (via monetary easing) may be coming to an end. While this could be construed as a vote of confidence for the US economy, this does not bode well for the EU as it continues to grapple with its recession and debt crisis.
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