Friday, April 6, 2012

Disappointing March Employment Report

The March employment report was basically a whiff or a strikeout.  Given the start of baseball season, we thought we might as well include some baseball lingo.  BLS threw the market a mean yakker.

The market is closed for today, but the S&P 500 futures were down 1.1%. With such a disappointing report, Bernanke may begin talking about further monetary easing again. His next public appearance will be at the Federal Reserve Bank of Atlanta's Financial markets Conference on Monday night.  We wouldn't be surprised if many politicians and/or Wall Streeters were leaving messages for Bernanke, begging him to be kind to the equity market when making his Monday night speech.  Who knows, but maybe President Obama is thanking the Lord for the Easter Holiday (Good Friday) for which the markets are closed.  He and many others are probably hoping the negative impact of such a bad report will die down a bit by the time the market opens on Monday morning.

Regarding the report, NFP went up by 120K, but significantly below the Street's 200K expectation.  In addition, it was lower than the 246K in March '11.  The private sector added 121K versus the 215K that the Street expected.  This was also lower than the 261K jobs added in March '11.

Manufacturing did well by adding 37K jobs.  This was slightly higher than the 26K manufacturing jobs added in March '11.  On the other end, 33.8K retail jobs were lost in March.  Last year, this sector had added 7.7K jobs.  The surge in temporary help services to which we pointed in the Feb. report, dipped down a bit in March, losing 7.5K jobs.

Average weekly hours declined to 34.5 hours in March from Feb.'s upwardly revised 34.6 hours.  This was in-line with expectations.  Hourly earnings change was also in-line at 0.2%.  We must note that hourly earnings change for Feb. was also revised up, to 0.3% from 0.1%.

Of the unemployed, 42.5% have been without jobs for more than 27 weeks (or approx. 6 months).  This is only slightly lower than Feb.'s 42.6% and remains a concern.  As we have said before, these figures are not impressive given that we are in the third year of recovery.

Unemployment rate dipped 10bps to 8.2% mainly because the labor force participation rate also declined. Participation rate went down to 63.8% from 63.9% in Feb.  This figure was also lower than the 64.0% in March '11.  As usual, we think U-6 unemployment rate is a better measure to look at.  It dipped by 40bps to 14.5%.  Although the decline is positive, this level is still very high.

Again, the futures indicate a negative reaction to the disappointing report.  When the market opens on Monday, this will likely be very true.  However, some of the losses will likely be pared by the time the market closes on Monday, mainly due to Bernanke’s upcoming speech on Monday night.  Many may decide to wait to hear what Bernanke says before making a move.  We’ll see.  Happy Easter to everyone!

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