Job Growth in U.S. Slows Sharply

The economy generated a net 110,000 new jobs in March, the Labor Department reported Friday, the fewest in eight months and yet another instance of employment growth falling short of expectations.

The total was significantly below the level needed to keep up with population growth and less than half the growth produced by a semi-robust February. Further, job growth for February was revised downward by 19,000 positions to 243,000.

Economists, who had been expecting about 210,000 new payroll workers in March, were split as to whether the report boded ill for the economy in general and employment in particular.

“Another mediocre job report, but it’s not indicative of the future,” said Mat Johnson of ThinkEquity Partners, a San Francisco research firm. “We expect to see a meaningful uptick in the pace of economic activity and hiring by around midyear.”

Jared Bernstein of the Economic Policy Institute in Washington was less upbeat. Noting that employment growth had managed to rise above 200,000 in only two out of the last 10 months, he foresaw more of the same.

“Perhaps March is a hiccup, but my guess is that the strong February numbers were the real aberration,” he said.

The stock market initially rose on the employment news, as it suggested that the Federal Reserve might be less aggressive in raising interest rates. But stocks later fell amid surging oil prices and a report showing strong service sector growth. The Dow Jones industrial average closed down 99.46 points at 10,404.30.

Weak employment growth has kept a lid on wages, reducing inflationary pressures but also squeezing workers, who face too much competition for their jobs to demand higher wages.

“This level of employment growth won’t lead us into recession, but the recovery will continue to feel pretty lackluster to most working families,” Bernstein said.

Friday’s report showed hourly wages for blue-collar workers in manufacturing and non-managers in services grew 2.6% over the last year, Bernstein pointed out, less than inflation. However, wages for the month grew 0.3%, beating expectations of a 0.2% gain.

The March unemployment rate fell to 5.2% from 5.4% in February. The rate is calculated by asking households about their employment status. According to that household survey, the number of workers increased by a net 357,000.

Although that is an extremely healthy number, most economists tend to discount the household number as unreliable on a month-to-month basis. In February, for instance, the household survey showed a loss of 97,000 jobs despite strong numbers from the more widely followed survey of company payrolls.

One of the healthiest employment sectors last month was one that depended on low interest rates: construction. It added 26,000 jobs in March and nearly 500,000 in the last two years. Seventy percent of that growth was in residential housing, where contractors are struggling to keep up with demand.

Also doing well was healthcare, up 16,000 thanks to an increased demand for hospital workers.

On the losing side was textile mills and apparel, down a total of 7,000 jobs. That sector is in long-term decline and was also hit by a lifting of global quotas in January. Manufacturing fell 8,000 while retail dropped 10,000.

During the three years of recovery since the last recession, economists have regularly predicted higher employment growth and regularly been disappointed.

Ian Shepherdson, chief U.S. economist for High Frequency Economics, a Valhalla, N.Y., consulting firm, speculated that the unexpected softness in March might derive from the Easter holiday and bad weather. However, he said in a note to subscribers that he couldn’t find any evidence of bad weather.

Wells Fargo senior economist Scott Anderson blamed longer-term trends: “A lot of our models are based on historical relationships, but what the numbers are suggesting is that the relationship between employment and production is not what it once was.”

The factors working to dissolve the relationship are by now well-known: Investments in technology have caused a spurt in productivity, which means businesses can do more with fewer workers. High healthcare costs make companies particularly reluctant to hire. The 2003 Bush administration tax cuts gave more incentive to invest in capital than labor.

But Anderson said Wells Fargo was forecasting 200,000 new jobs a month “as far as the eye can see. We’re not ready to throw in the towel yet.”