Hold The Bubbly

Dow Jones Newswire’s Dr. John McAuley admonishes investors that “March Jobs Gain Welcome, But Hold The Bubbly”

In a snarky column, the Econonics Prof warns that “Despite the euphoria in some quarters in the wake of the much stronger than expected March nonfarm payrolls report, it’s probably best to hold the champagne. While the 308,000 gain in payroll jobs in March was a welcome sign that the labor market has finally joined in the recovery, the headline increase was nearly the only upbeat statistic in the entire jobs report.”

McAuley holds a Ph.D. in international trade and macroeconomics, and has been teaching Economics at Fordham University since 1974.

Beyond the headline number, McAuley observes:

-The unemployment rate jumped 0.1 percentage point to 5.7% as 182,000 people joined the jobless ranks, eclipsing the 179,000 increase in the labor force. There were 284,000 workers who lost jobs in March, a decline of 49,000 first-time job seekers, and an unchanged number of workers returning to the work force.

-The workweek shortened by six minutes to 33.7 hours in March – an indication that the existing workforce was used less intensively.

-Indeed, when the number of production workers are multiplied by the hours they worked to get an indication of total labor input, the resulting index of aggregate hours worked actually declined by 0.1% last month.

-Average hourly earnings only edged up by 0.1%, so, combined with the decline in total hours worked average weekly earnings fell by 0.2% in March, suggesting that there may have been more jobs, but less income.

-In percentage terms the jobs gain in March amounted to 0.2% compared to the expectation of an increase of 120,000, or 0.1%. If the payroll data were regarded like any other economic indicator – which measure growth or contraction by percentage change – this increase would be interpreted as roughly in line with expectations.

-There was actually a small (1,800) decline in temporary help service workers, a category that is often looked to as a leading indicator of wider hiring gains, particularly in manufacturing.

-In addition, the factory workweek – one of the components of the index of leading indicators – fell by six minutes, so aggregate hours worked in manufacturing declined by 0.3% in March, an indicator many economists use for forecasting industrial production.

On balance the March employment report was encouraging about the prospects for an improving employment market, but the details don’t merit as much celebration as the headlines suggest.