Unemployment Remains Unchanged in March

The unemployment rate remains unchanged as of today, at 9.7% for the narrow measure of employment (U-3). The broader measure of unemployment, U-6, a measure of long-term unemployment increased from 16.8% to 16.9%. See the definition of U-6 unemployment at the bottom of the table, below.

One positive note was that private payrolls increased by 123,000 workers. I don’t include the 48,000 government Census workers as “jobs” since their wages are just transfer payments. If you discount the Census workers, unemployment would be at 9.8% (the unrounded current number is actually 9.749%). Basically we haven’t improved much over the last year.

Tim Geithner was quoted as saying today, “We’ve made a lot of progress, we’ve got some work to do still and it’s going to take some time to heal the damage.” I don’t know how he can say this in light of the above table. The BLS says right at the top of their release that 15 million Americans are still out of work. More worrisome is the increase in the U-6 percentage.

Gains were seen in health care (+27,000), manufacturing (+17,000), and temporary services (+40,000). One surprising area of growth was construction (+15,000) since this sector has been steadily shedding jobs. My guess is that some of the “shovel ready” government infrastructure make-work projects are getting going. But that will run out eventually. Also the growth in health care is not a healthy sign as I see it as more of a shift from the private market delivery of health care to a government mandated system supported by tax dollars.

One important figure was the continued decline in wages. While hours worked gained 0.1%, wages fell by 0.1%. From the BLS release:

In March, average hourly earnings of all employees on private nonfarm payrolls fell by 2 cents, or 0.1 percent, to $22.47, following a 4-cent gain in February. Over the past 12 months, average hourly earnings have risen by 1.8 percent. In March, average hourly earnings of private production and nonsupervisory employees fell by 2 cents, or 0.1 percent, to $18.90.

The news media are spinning this news as a positive, (“third gain in the past five months” or “fastest pace in three years”). Which is all true. Most commentators are pointing at manufacturing, which has shown some good increases in activity, to lead us out of the recession. This is possible but I think this call is premature. Without an increase in consumer consumption (PCE), manufacturing gains will stall.

David Rosenberg thinks the gains in tech equipment sale and software are just front-loading to beat the expiration of tax benefits. I think a lot of it is that cheap interest rates are fooling manufacturers into thinking they can afford new equipment when actually consumers have been cutting back spending and increasing savings (see my comment on PCE and savings and why consumption will also stall). Also, manufacturers are offering good deals for their customers.

I hope that manufacturing will continue to improve but I don’t think there are enough real savings now to support manufacturing growth. This is a confusing issue because into the interest rate mix you have to figure in the record amount of debt the Treasury is selling, which is causing interest rates to climb. The 10 year note hit 3.954% today (Friday). The Treasury is swamping the market with debt. Next week they are selling another $94 billion. While companies are relatively flush, a rise in interest rates would slow down a lot of planned projects during a continuing credit freeze.

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4 comments to Unemployment Remains Unchanged in March

  • Carl

    Jeff: I agree with you that we will not see meaningful employment gains until the de-leveraging process runs its course. But I think the more damning piece of data about this recovery is the fact that the denominator for the unemployment rate has not risen dramatically. It is very common for unemployment to rise even as the # of employed begins to improve as discouraged workers come back into the system (and swell the denominator).

    The fact that the denominator and therefore the unemployment rate hasn’t increased in a meaningful way is a sure sign that discouraged workers aren’t seeing a lot of reason to come back into the job search pool. The press always gets it wrong on this point as unemployment should be rising now (it should not be declining or steady at this point in the cycle), given how many people dropped out of the denominator in the last 18 months.

    All this “denominator effect” proves is that the recovery remains punk and the demand recession is hardly over. My guess is the unemployment numerator (those employed) will stay weak too and may even get worse as state and local government job cuts may erase any (modest) job gains in the private sector.

  • kingofnyct@gmail.com

    The increase in tech equipment sale and software is due to overwhelming demand and sales. This sector has no relevance to the general economy and is doing excellent. A bad economy drives technology sales exactly because people are cost cutting.

  • [...] 162,000 jobs added in March. Of those, 48,000 were government workers, many related to the U.S. Census. These aren’t real “economic” jobs. See my article: “Unemplyment Remains Unchanged in March.” [...]