Disappointing March Employment Report

Well, this one was a miss for us.  March NFP change came in at a very disappointing +88K, far below the +193K consensus and even further lower than our +200K estimate.  We certainly will be reviewing our NFP model this month in order to hopefully increase accuracy.  In the meantime, we are fortunate that the less risky sectors which we recommended a year ago have done well, and are not getting hit as much as the other sectors today.  Overall, S&P 500 is down nearly 0.9%.  Going back to the employment report, some details are provided below.

• Biggest decline in jobs was on the retail side which dipped 24.1K from the previous month.  Combined with an unexpected decline in wholesale trade (-1K), this could indicate that employers in the retail sector are not expecting very exciting spring and summer seasons.  In fact, the largest decline in wholesale trade jobs was in non-durable goods (-3.9K), while on the retail trade side, jobs in building materials and garden supply stores, and in clothing and clothing accessories stores declined 10.1K and 15.3K, respectively. 
  
• Biggest gains were in education and health services, up 44K.  Temporary help service jobs also increased, up 20.3K.  Continuing increase in temporary jobs during this recovery period, combined with overall moderate gains in jobs, further indicates how uncertain many employers continue to be. 
  
• Jobs in construction also increased, up 18K, driven mainly by 23.3K gain in specialty trade contractors (site preparation, pouring concrete, etc.). 
  
• Average weekly hours increased to 34.6 from 34.5 in Feb. and last year. 
  
• Monthly change in average hourly earnings was a mere increase of a penny, compared to the 3c increase we saw in Feb.  Hourly earnings were up only 1.8% Y/Y, slightly below the latest change in headline CPI, which was 2%.  This data provides further support for our belief that wages are not growing as fast as they should.  Then again, it also shows that the threat of too much inflation is not close by, which means the Fed can continue its monetary easing policies for a long time. 
  
• Labor force participation rate stands at 63.3%, down 20bps from Feb. In terms of duration of unemployment, 27+ weeks declined by 186K, which is somewhat positive given the increase we had seen in the prior month.  In addition, those unemployed less than five weeks declined by 203K.  However, the numbers for 5-14 weeks and 15-26 weeks increased by 56K and 42K, respectively.