March Jobless Rate At 2-Year Low: 8.8 Percent
RENEE MONTAGNE, host:
Later this morning the government comes out with its monthly jobs report, and economist are expecting another month of fairly strong job growth. We'll also get the latest reading on the nation's unemployment rate. It's currently 8.9 percent. NPR's Tamara Keith is here to tell us what we might be able to expect. Good morning.
TAMARA KEITH: Good morning.
MONTAGNE: What are the experts predicting for the March unemployment rate? Let's start with that.
KEITH: Well, the consensus is that the unemployment rate will stay the same or maybe rise slightly back to 9 percent. I spoke with Ian Shepherdson about it. He's a chief U.S. economist at High Frequency Economics and a past winner of the Wall Street Journal's Economic Forecasting Competition, which means he has a pretty good record of getting things right and he agrees the rate is likely to stay the same or maybe just rise one-tenth of a percent.
Mr. IAN SHEPHERDSON (Chief U.S. Economist, High Frequency Economics): But then again I thought that last month and the month before. You know, it's the element of randomness that's deceiving everybody in the forecasting world I'm afraid.
KEITH: The thing that's throwing him and a lot other economists for a loop is that there was this dramatic drop in the unemployment rate the last few months. It was 9.8 percent in November, then 9.4 percent in December, then dipped again to 9 in January, and then another little drop in February.
Mr. SHEPHERDSON: It's come completely out of the blue with two enormous declines followed by a slightly smaller decline, none of which I expected, and all of which is very baffling.
MONTAGNE: And why is it so baffling? As we've been reporting, payrolls have increased by hundreds of thousands in resent months.
KEITH: Yeah, the economy has certainly been producing jobs, but basically every economist says not nearly enough jobs to see the kinds of improvement in the unemployment rate that we've seen. And this gets at sort of a disconnect in the government's monthly jobs report. That report that comes out later this morning is actually a combination of two surveys. There's a survey of households where they call up and ask, hey, were you working this month? And then there's a survey of employers where they ask how many people employers had on their payrolls.
MONTAGNE: And are these two surveys showing the same results?
KEITH: No, that's where the disconnect is happening. The survey of employers is telling us we've had modest job growth, and then the household survey, which tells us the unemployment rate, it's saying we're seeing a blockbuster improvement. The thing is the household survey can show people who are self-employed and work for very small businesses and that may not be included in the other surveys.
So it seems like they're both looking at the same labor market, but they're telling us different things. And also, one more thing, the household survey is pretty volatile from month to month. So for instance, Ian Shepherdson says 700,000 people recently just up and disappeared from the labor force and he says something like this has happened before.
Mr. SHEPHERDSON: In April of last year, the labor force apparently jumped by 625,000 people in one month. Then in the following month, it fell by 283,000. I am pretty sure that neither of those two things actually happened. But the numbers are what they are.
KEITH: And what they are is pretty jumpy at times.
MONTAGNE: So Tamara, the take home message here is don't read too much into any one month's numbers?
KEITH: Exactly. It's important when these come out to look at the trends rather than one month in isolation. And what the trends are telling us is that, you know, we've had modest job growth now for a long time. In the last year payrolls have rose by $1.3 million jobs. And in the past few months, the unemployment rate has come down a lot.
But the other thing is that if job growth continues at this current pace which is, you know, somewhere in the 200,000 jobs added pace, the unemployment rate can't keep falling like it has, and so we're going to have this long, slow, slog, to get back to anything resembling full employment.
MONTAGNE: NPR's Tamara Keith, thanks very much.
KEITH: Thank you.
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