The Bureau of Labor Statistics (BLS) released the “official” jobs report Friday and the unemployment rate dropped from 7.7% last month to 7.6%. The bad news is that only 88,000 net new jobs were added considerably down from the 236,000 added in February. Experts predicted 200,000 jobs for the month.
The private sector added 95,000 net new jobs but these were offset by a net drop of 7,000 government jobs. The decline was primarily in federal government jobs including the postal service. Just Wednesday ADP reported that the private sector added 158,000 jobs. We will need to wait for next month’s corrections to see who was wrong.
The reason the unemployment rate fell is because 496,000 people left the job market. The labor participation rate was the lowest in 34 years. The economy has added an average of 169,000 per month over the last year, so the March performance is approximately half the average.
Retail stores cut 24,000 jobs; Post Office cut 12,000 jobs
In March, employment in retail stores surprisingly declined by 24,000 jobs. The retail industry had added an average of 32,000 jobs per month over the prior 6 months.
The U.S. Postal Service cut employment by 12,000 last month as part of its program to cut over 150,000 jobs. Congress refuses to pass a bill to reform the postal service to stop the huge budget shortfalls in that agency.
Employment in other major industries, including mining, manufacturing, wholesale trade, transportation and warehousing, information, financial activities, state government, and local government, showed little change over the month.
Professional and business services added 51,000 jobs in March. Over the past 12 months
employment in this industry has grown by 533,000.
Job growth in health care continued in March, with a gain of 23,000, similar to the prior 12-month average. Within health care, employment increased by 15,000 in ambulatory health care services, such as home health care, and by 8,000 in hospitals.
Construction employment continued to trend up in March adding 18,000 jobs. Job growth in this industry picked up this past fall; since September, the industry has added 169,000 jobs. Specialty trade contractors were responsible for 23,000 jobs. Employment in specialty trade contractors has increased by 128,000 since September, with the gain about equally split between the residential and nonresidential components.
The employment in leisure, hospitality, and food and drinking places continued to trend up in March adding 13,000 jobs. Over the past year, the industry added 262,000 jobs.
Report shows budget cuts and austerity kills jobs
This is the first jobs report after the sequester passed by Congress in 2011 took effect. The president has warned the country for months that the $85 billion dollar across the budget cuts would eventually kill 750,000 jobs. This report reflects the first wave of those job losses. This could be a predictor of bad things to come.
Republicans advocate spending cuts and austerity as a path to job creation. They argue that if government spending is cut the private sector will create jobs. Democrats argue that in a weak economy, government spending is the best prescription for job growth. Democrats argue that debt reduction will result from the increased revenue from more people working.
Historical data actually favors the Democratic approach. In all the past recessions including those during the Reagan and both Bush administrations, government spending as a percent of GDP was higher during those recoveries than the Republican Congress has permitted in this recovery. As a result, the economy recovered slower with Republican-imposed austerity now than under higher spending in other recessions.
The sequester is bad because it cuts the number of government positions and cuts the take home pay of federal workers. Budget cuts in grant programs to state and local governments also result in lay offs or reduced pay at the local level. This means less money is being spent in the economy. Government contractors are also cutting employment due to budget cuts. All of this adds up to weak job performance.
The bad part is the worst is yet to come.
It is doubtful that the weak jobs report will move Congress to do anything. Austerity programs have put the UK and other European nations into recession. Is another recession in our future? We will see.
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