Weak Jobs Growth Questions Recovery, Demands For QE3

The employment data from the BLS this morning shocked a lot of economists and writers because it came in much lower than expected. The consensus was for around 201,000 new jobs (February was +240,000), but the report came in at only 120,000.

Immediately came the expected headlines:

All of the above articles pointed fingers at the Fed, almost pleading for more monetary stimulus to save us from pending weakness. More about this in a moment.

The BLS report showed that the household survey of overall unemployment rate actually declined from 8.3% to 8.2%:

This has been a steady trend since last summer. But the problem is that the real reason the rate declined is that there were fewer people looking for jobs. In other words in the last month more people stopped looking for work and the labor participation rate declined. Here is what it looks like:

 The labor participation rate is down 0.1% and the “Not in labor force” grew by 333,000 discouraged job seekers.

In February the private sector added 233,000 jobs; this month it was only 121,000. According to the BLS:

In the prior 3 months, payroll employment had risen by an average of 246,000 per month. Private-sector employment grew by 121,000 in March, including gains in manufacturing, food services and drinking places, and health care. Retail trade lost jobs over the month.  Government employment was essentially unchanged.

Health care added 26,000 jobs (thanks to all those aging Baby Boomers) and manufacturing added 37,000, of which 12,000 came from the automotive sector. Retail fell 34,000. 

The average work week fell by 0.1% and wages increased by 0.2%.

Also “[t]he change in total nonfarm payroll employment for January was revised from+284,000 to +275,000 [-9,000], and the change for February was revised from +227,000 to +240,000 [+13,000].”

For those of you who wish to see the “U-1/U-6″ data, please go here. U-6, the broadest measure of unemployment went from 14.9% to 14.5%, again reflecting the declining participation rate.

Every article I read about this sudden decline raised the question of what the Fed may or may not do with respect to QE3. The consensus is that if employment sags, the Fed should juice the economy with more of Dr. Bernanke’s Magic Elixir. It is interesting that years and years of indoctrination has cemented this myth in the minds of our media despite the fact that no one has ever proven that printing money actually does any good. This is, of course, because it doesn’t. As Jim Grant of “Grant’s Interest Rate Observer” pointed out in his article yesterday “Piece of My Mind“, the Fed really is unaware of this or the unintended negative consequences of their various monetary schemes.  When you hear talk about “unintended consequences” what that means is that someone is paying for someone else’s mistakes. In the case of the Fed, that would be us.

The Fed can pump massive amounts of fiat dollars into the economy but it will create nothing “real” or “organic”. If we could print our way to prosperity, we would have cured poverty years ago. I believe what we are seeing in the economy right now—mostly good news—is not evidence of an “organic” recovery, but rather the effect of money steroids. This kind of growth, considering the depth of the economic collapse we are still recovering from, plus prior rounds of monetary stimulus, is shallow, without a lot of ability to sustain itself. This is the subject of a coming article.

I cannot tell if this single month’s report is a “pothole” on the road to more job growth or the beginning of a downward trend. I would be inclined to think it represents serious underlying problems, but … a lot of fiat money has been dumped into the system. Watch and see.

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