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Economy Adds 88K Jobs in March; Unemployment Rate Down to 7.6%

The economy added 88,000 jobs in March--the weakest showing since last June--but the unemployment rate dropped to 7.6.percent, its lowest level since December 2008, the ""Bureau of Labor Statistics (BLS)"":http://www.bls.gov/news.release/archives/empsit_04052013.pdf reported Friday. Economists had forecast payrolls would grow by 200,000, and that the unemployment rate would remain at 7.7 percent.

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Job growth for February, originally reported at 236,000, was revised upward to 268,000, and for January revised up to 148,000 from 119,000.

Average weekly hours rose along with average hourly earnings.

Government was only a slight drag on the payroll data, subtracting 7,000 jobs, 14,000 federal slots--mostly post office jobs--offset by a net increase of 7,000 jobs at the state and local level.

The number of retail jobs, which had grown by 37,000 in January and February, fell 24,000 in March, attributable to both an early Easter and the delayed fallout of the elimination of the payroll tax holiday at the beginning of the year.

In the first quarter, the nation added an average of 168,000 jobs per month, down from 209,000 per month in the fourth quarter of 2012 and from an average of 262,000 per month in the first quarter last year. One contributing factor could have been a sharp drop in corporate profits in the fourth quarter from the third.

According to the Bureau of Economic Analysis (BEA), which reports on corporate profits as part of its Gross Domestic Product (GDP) report series, pre-tax profits grew $27.3 billion in the fourth quarter, down sharply from $86.2 billion in the third quarter. (The preliminary estimate of first-quarter corporate profits as calculated by BEA will be reported on May 30.)

According to the household survey--one of the two surveys used to put together the employment report--the total labor force fell 496,000 in March as unemployment dropped 290,000 to 11,742,000--under 12,000,000 for the first time since President Obama took office and the lowest since December 2008--and employment fell 206,000.

One reason for the drop in unemployment was that the number of “re-entrants” to the labor force fell 164,000. In the last three months, the number of re-entrants to the labor force has fallen an average of 137,000 per month, a reflection of a still-tight hiring market.

There were bright spots in the payroll survey: The number of professional business service jobs increased 51,000 in March (though down from the 80,000 increase in February) the number of health care and education jobs increased 44,000, and the number of construction jobs increased 18,000--though a sharp reduction from the 49,000 increase in February.

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Most of the increase in construction jobs came among ""residential specialty trade contractors,"" who added 12,500 jobs after adding 16,100 jobs in February. The number of residential building construction jobs grew 2,300 in March on top of 1,100 in February.

The growth in professional and business service jobs included 20,300 new temporary jobs, suggesting employers may not have the confidence that product or service demand will continue to allow them to hire permanent workers.

Within the financial sector--which in total contracted by 2,000 jobs--the number of underwriting jobs at commercial banks fell 2,900.

The number of persons “not in the labor force” rose 663,000 to just under 90 million, and the labor force participation rate fell to 63.3 percent, the lowest level since May 1979. The shrinking labor force, arithmetically, produces a lower unemployment rate, just as an increase in the labor force when persons previously unemployed re-enter the work force to seek employment would increase in the unemployment rate.

The employment-population ratio, which measures employment as a percentage of the over-16 population, fell to 58.5 percent, its lowest level since August. The inverse of the employment-population ratio suggests an “unemployment rate” of 41.5 percent--without using the official definition of unemployment--out-of-work, available-for-work, and looking-for-work. The employment-population ratio dipped to a low of 58.2 percent several times since the Great Recession began in December 2007.

The greatest improvement in the unemployment rate by demographic and age factors came among teenagers. The unemployment rate among those 16-19 years of age fell 0.9 percentage points to a still high 24.2 percent. Unemployment rates based on education--with one exception--fell with the steepest drops for high school graduates with no or some college. In each case, the unemployment rate fell 0.3 percent to 7.6 percent for high school graduates with no college and 6.4 percent for those who attended college but do not have a bachelor’s degree. The unemployment rate for those with a bachelor’s degree--the cohort most likely to be homeowners--remained at 3.8 percent.

According to the report, average weekly hours for all employees rose to 34.6 from 34.5, while average hourly earnings rose one cent, leading to an increase in aggregate earnings that could translate into improvement in aggregate demand. Wages, on average, represent about 55 percent of total personal income, which fuels personal consumption spending.

The unemployment rate has added significance with the announcement by the Federal Reserve that the target fed funds rate would remain at its historic low, 0 to 0.25 percent, at least until the unemployment rate fell below 6.5 percent. The Fed also set an inflation target for keeping rates low.

The number of persons out of work for 27 weeks or longer--""long term unemployed""--fell 186,000 to 4,611,000, the lowest level since June 2009, but the average duration of unemployment rose to 37.1 weeks from 36.9 weeks in February due to an increase in those unemployed 15 to 26 weeks.

_Hear Mark Lieberman every Friday on P.O.T.U.S. radio, Sirius-XM 124, at 6:20 a.m. and again at 9:20 a.m. Eastern time._

About Author: Mark Lieberman

Mark Lieberman is the former Senior Economist at Fox Business Network. He is now Managing Director and Senior Economist at Economics Analytics Research. He can be heard each Friday on The Morning Briefing on POTUS on Sirius-XM Radio 124.
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