Jobs Report A Litmus Test For Economy's Direction

The U.S. economy added only 120,000 jobs in March, far below expectations. The job gains were the smallest in five months. The report isn't a conclusive verdict on the economy. It could be an off month of weak growth or the sign of something more troubling — a serious hiring slowdown.

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From NPR News, this is ALL THINGS CONSIDERED. I'm Audie Cornish.

And we begin this hour with a dud. Just when it seemed like U.S. employers were hiring again, we get today's jobs report. The economy gained 120,000 jobs last month, far fewer than expected. Today's numbers from the Labor Department disappointed economists because recent months had seen job gains above 200,000. The unemployment rate fell slightly to 8.2 percent, and NPR's Chris Arnold tells us what this latest report says about the direction of the economy.

CHRIS ARNOLD, BYLINE: One headline for this jobs report could be that it's got a lot of economists scratching their heads; that's because it actually could mean a bunch of different things. Let's start with the number of jobs gained. That part's pretty simple - 120,000 jobs is not a good number. Betsy Stevenson is an economist with the University of Pennsylvania's Wharton School.

BETSY STEVENSON: Obviously, the report is disappointing. We were all hoping to see the kind of gains we'd seen the last few months, over 200,000, continue.

ARNOLD: Stevenson explains that there's concern lately about whether overall economic growth is still too weak to support the stronger job gains. The Federal Reserve has raised this question lately, and so perhaps this latest jobs report shows that, yes, the stronger job gains are fizzling, but then again, it might not mean that.

STEVENSON: This report doesn't actually even rule out that we're just continuing to have a recovery at the same pace. Remember that the jobs report is sort of plus or minus 100,000.

ARNOLD: That means that the data can be revised dramatically up or down. So you can't rely on one month's data right when it comes out. Also, other job surveys pointed to stronger job gains in March. Bill Dunkelberg is the chief economist with the National Federation of Independent Businesses, and he tracks smaller companies.

BILL DUNKELBERG: Our March survey suggested we had the best job-creating month that we've seen in a year, so we were expecting a little bit better number than this.

ARNOLD: And another private job survey, this one called the ADP report, also showed stronger results for March.

DUNKELBERG: So overall, you know, we wonder what's going on in the economy here, why we didn't get the job creation, or how much of this is just due to the fact that, you know, we're applying seasonal adjustments, and they're all screwed up because certainly the seasonals were - seasons were not average this year.

ARNOLD: In other words, maybe Mother Nature, with her warm winter, has mixed up the computer models that are used to generate these numbers since they adjust for seasonal factors. Certainly the mild winter could have caused some hiring to happen sooner. For example, Betsy Stevenson says the retail sector lost jobs in March, but...

STEVENSON: It is possible that some of the hiring that normally happens in March happened in February, and some of it might have happened in January. And if that's the case, then the right thing to think about is what was the average job growth in January, February and March.

ARNOLD: And overall, even with the weaker numbers in March, the U.S. economy added 212,000 jobs a month on average over the past three months.

STEVENSON: That number is still pretty darn good. So that says that we are having job growth that is the kind of growth that can bring the unemployment rate.

ARNOLD: At least slowly bring it down. But while this latest report is kind of murky, we do know what some of the big factors are that are holding back job growth that could even be stronger. One is the weak housing market. Chris Mayer is a housing economist at Columbia University. Chris Mayer is a housing economist at Columbia University. He says that back in the 1980s, coming out of the last really bad recession, we were getting four times the boost from homebuilding compared to what we're getting now.

DR. CHRIS MAYER: That difference is a significant effect itself on the economy. That's probably cost us, you know, millions of jobs.

ARNOLD: In this latest report, we lost another 5,000 homebuilding jobs. And, of course, there are millions of people who've given up even looking for jobs. That's a big reason, actually, that the unemployment rate has now fallen down to 8.2 percent. Those discouraged workers don't get counted as unemployed. Chris Arnold, NPR News.

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