After months of solid gains with the administration touting that the labor market is at its healthiest level since the turn of the century, payroll employment increases for March fell well short of expectations with just 126,000 jobs added, according to data released the Bureau of Labor Statistics on Friday.
The jobs report for March, which Fannie Mae Chief Economist Doug Duncan termed "disappointing," follows a 12-month period which averaged 266,000 jobs per month added and a February that saw payrolls increase by 295,000. This data seems to indicate that more economic improvement is needed before significant housing improvement can occur and the economy can "drag housing upward" in 2015, as has been consistently forecasted by Fannie Mae in the last several months, according to Duncan.
"The report suggests that, through the first quarter, the economy isn't picking up from an income growth perspective, which in our view is a key missing factor in housing growth," Duncan said. "The downside-surprise report—featuring the weakest monthly gain in nonfarm payrolls since the end of 2013 and large downward revisions—reinforces a loss in momentum already witnessed in other recent data, including consumer spending and manufacturing."
The unemployment rate remained at 5.5 percent from February to March, its lowest level since 2008, but in February Duncan attributed the declining unemployment rate largely to people leaving the labor force. The number of persons classified as unemployed changed little from February to March at 8.6 million. The civilian labor force participation rate was 62.7 percent for March and has hovered between 62.7 percent and 62.9 percent since April 2014, according to BLS.
Average hourly earnings increased by seven cents month-over-month in March up to $24.86 and have increased by 2.1 percent since March 2014. Analysts, including Duncan, have repeatedly stated that to solid wage growth is needed in order to facilitate significant improvement in the housing market.
"While average hourly earnings picked up 0.3 percent, the year-over year rise of 2.1 percent showed no signs of a break-out from its trend over the past two years. These developments reaffirm the Fed’s desire to err on the dovish side," Duncan said. "We remain comfortable with our call that the Fed funds rate lift-off will occur in September. The setback in the hiring picture is in line with consumer sentiment regarding the housing market from the Fannie Mae National Housing Survey. The March survey, to be released on Monday, is expected to show a marked deterioration in consumers’ assessment in some key areas of the housing market amid a jump in the share of consumers believing that mortgage rates will go up."