Other Fed officials have been more wary. Over the past two years, similarly strong job gains during the winter faded by the summer. The slowdown in the job market in March could portend a repeat of the pattern. In a speech Friday morning, Boston Fed President Eric S. Rosengren said he believes keeping central bank stimulus in place through this year is “an appropriate response to labor market scarring.”
In particular, a significant decline in the number of people in the workforce suggests that March’s results were not a fluke. Nearly half a million people left the job market, bringing down the percentage of Americans in the labor force to the lowest level since 1979. That helped bring the unemployment rate down to 7.6 percent, but for all the wrong reasons.
The jobs recovery is getting shaky.
“The elephant in the room is the weakness in labor supply,” JPMorgan economist Michael Feroli wrote in a research note.
In addition, several industries that have been driving job growth for the past several months registered weaker gains. The construction sector, propelled by the rebound in the housing market, generated about 18,000 jobs in March, about half the gain of the previous month. Health care also fell, to 23,000 new jobs.
The retail sector lost jobs after adding an average of 36,000 positions each of the past six months. National Retail Federation chief economist Jack Kleinhenz attributed March’s 24,000-job decline to lower sales at home improvement stores as rebuilding following Hurricane Sandy tapered off. He also said the unusually cold March may have kept shoppers at home, leading retailers to scale back on labor.
It is unclear what role, if any, the recent expiration of payroll tax cuts may have played in retail hiring. Consumer spending has remained strong this year despite the smaller paychecks, and retailers aren’t set to release their March results until next week. But Kleinhenz said many businesses are walking a tightrope between sales and staffing.
“The employers in retail still are trying to manage a very challenging environment,” he said.
There were a few nuggets of good news in Friday’s report. The average workweek rose slightly to 34.6 hours. About 20,000 temporary workers were hired in March, indicating that employers may be preparing for stronger demand over the next few months. Several economists said they expect the jobs data to be revised upward, although the number probably will remain weak.
That silver lining made little difference to Wall Street. Stock markets plunged more than 1 percent shortly after opening Friday, although the major indexes cut those losses in half or more by the closing.