Friday, April 1, 2011

March Employment: Sluggish Acceleration Continues

If the US economy was a car, Motor Trend would not be impressed with its acceleration...

The BLS reports that nonfarm payrolls (i.e., "jobs") increased by 216,000 and the unemployment rate decreased to 8.8% in March (from 8.9% in February).
That's the best payroll number since last spring - the economy appeared to be entering a more rapid recovery with 277,000 and 458,000 jobs added in April and May 2010, respectively, before it wobbled last summer.  Overall, the March numbers are consistent with an economy climbing out of a deep hole (13.5 million people remain unemployed) at a painfully slow pace. 

The slow employment recovery is consistent with the pattern established by the two recessions of the "great moderation" era, in 1990-91 and 2001, but those recessions were quite mild by comparison.  This is a disappointment to those of us who were hoping that the a severe recession would be followed by a sharp recovery, like in the last downturn of comparable magnitude, in 1981-82.
The payroll number comes from a survey of firms, and the unemployment rate is calculated from a survey of households.  The household survey reported an increase of 291,000 in the number of people employed; the number of unemployed decreased by 131,000 and the labor force increased by 160,000.  Labor force participation was steady at 64.2%.   

On a non-seasonally adjusted basis, the unemployment rate fell from 9.5% to 9.2%, and payroll employment rose by 925,000.  That is, the economy actually added alot of jobs in March, but a large part of that is a normal seasonal increase, so we shouldn't get excited about it.

See also: Calculated Risk, Ezra Klein, Sudeep Reddy.


The Arthurian said...

Gotta love the St. Louis Fed.

Is there any good explanation for this pattern of slow employment recovery?

Oh, and why "twenty-cent" paradigms? Is that your two-cents-worth, after inflation??

Bill C said...

Yes! I'd be hurting without FRED.

I like your hypothesis on the blog title - I may use it next time someone asks, but the original idea was a (bad?) pun: "paradigm - pair of dimes - twenty cents".

Hopefully there's some good research being done on the slowness of the recovery. The main ideas floating around out there that I'm aware of are: (i) many of the pre-"moderation" recessions were caused by the Fed raising rates to choke off inflation, and it easy for the Fed to move in the opposite direction and (ii) recoveries after financial crises tend to be very slow as people rebuild their balance sheets - i.e., they need to save more to make up for the wealth lost in the "crash". Obviously, those aren't mutually exclusive.