WASHINGTON – Economists mostly shrugged off news that U.S. hiring slowed in March as a one-month aberration warped by warm weather.
But what if they’re wrong? What if the sharp drop in job creation signaled something more ominous?
Investors appeared worried Monday. The Dow Jones industrial average lost 131 points on the first day of trading since the government said Friday that employers added just 120,000 jobs in March. That was only half the pace of hiring the economy enjoyed in December through February and well below the 210,000 economists had expected.
Economists were quick to explain away the March numbers.
Unseasonably warm weather in January and February, they said, had led construction companies and other employers to hire workers earlier in the year than usual – in effect, swiping jobs that would have occurred in March.
And they said jobs numbers typically bounce around from month to month. Some economists are waiting to see whether employment growth picks up again when the hiring numbers for April are announced the first week of May.
But many also see reasons to worry about the job market. Here are five:
Sluggish economic growth
The economy hasn’t been growing fast enough to sustain the level of job growth the United States enjoyed from December through February – an average of 246,000 jobs a month.
The economy is expected grow around 2.5 percent this year. Economists say that’s consistent with monthly job growth of around 140,000.
Some economists fear that March’s weaker numbers are just a return to the normal link between economic and job growth – and that hiring won’t pick up until the economy accelerates.
High gasoline prices
U.S. gasoline prices have risen 65 cents this year to a national average $3.93 gallon, according to the AAA Daily Fuel Gauge. Economists had expected consumers to keep spending at a healthy pace in the face of higher prices at the pump. Partly, that was because consumers had endured a run-up in gasoline prices last year and would be less vulnerable to sticker shock. Moreover, many households have reduced debts and are in better financial shape.
But retailers cut more than 62,000 jobs in February and March. That suggested that gasoline price increases might have started to pinch consumers’ budgets – and their willingness to shop, says Joel Naroff, chief economist at Naroff Economic Advisors. Consumers drive about 70 percent of U.S. economic activity, so their spending is crucial for economic and job growth.
Companies cut workers’ hours in March, reducing their average weekly earnings. Pay isn’t keeping up with inflation either. In February, inflation-adjusted earnings were 1 percent lower than a year earlier. That means less money to spend without borrowing or dipping into savings. And many consumers are swearing off credit card debt: They cut credit card borrowing by $5 billion this year through February. The Bank of America economists say the income trends are “hardly a positive for consumer spending.”
The economy has added nearly 1.9 million jobs during the last year, and unemployment rate has fallen from 9.1 percent to 8.2 percent since August. But the job market might not be as strong as those numbers suggest. One broad measure of the labor market’s health refuses to strengthen: The percentage of the working-age population that’s actually working has been stuck below 59 percent for 2½ years. It hadn’t previously fallen that low since 1984, before many women poured into the workforce.
Many economists say millions of Americans have given up looking for work.
A lot of catching up to do
The solid job gains of December to February disguised a painful fact: The economy still has a long way to go to recover all the jobs lost in the Great Recession and its aftermath. From January 2008 to February 2010, the economy lost 8.8 million jobs. About 3.6 million, or 40 percent, of those have been regained. Heidi Shierholz, an economist with the Economic Policy Institute, calculates that, accounting for population growth, the United States would have to create 350,000 jobs a month for three years to return to pre-recession employment levels. That’s nearly three times as many jobs as the economy generated last month.