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Wall
Street Journal...
U.S. Labor
Market Slows Its Stride
Employers Notch 120,000 Jobs, Amid Still-Fragile Recovery
By Neil Shah and Carol E. Lee
The U.S. economy added 120,000 jobs last month, less than expected and
an indication that momentum could be slowing. Phil Izzo and David
Wessel have the details. Photo: Joe Raedle/Getty Images
U.S. employers throttled back hiring last month, undermining views that
the recovery was gaining momentum but stirring investors’ hopes of
further steps by the Federal Reserve to spur the economy.
The government’s main snapshot of the labor market showed employers
added 120,000 jobs in March, half the upwardly revised number of the
month before. That snapped a three-month streak of 200,000-plus jobs
growth, the economy’s best showing since 2006. There were bright spots:
Wages inched up and governments cut just 1,000 jobs, suggesting the
drag from big public-sector cutbacks is easing.
But mostly, the picture was disappointing at a time when all eyes are
on the U.S. to help keep global growth humming. The jobless rate, which
is obtained from a separate survey of households, edged down to 8.2%
from 8.3%, its lowest point in three years. However, that decline was
due less to new hiring than people abandoning their job searches.
Friday’s report stirred fears of a repeat of what happened in the early
part of the past two years, when signs of strength petered out as
months ticked by. Consumers increased their borrowing in February,
Federal Reserve data showed Friday, but use of credit cards dropped for
the second month, suggesting a pullback on some expenses. But most
economists cautioned it was too soon to conclude that a slowing trend
is under way. Private economists and the Federal Reserve have predicted
that job creation would moderate this year, given that overall demand
growth remains subdued and the economy faces challenges such as higher
oil prices.
Stock markets in the U.S. and Europe were closed for Good Friday but
prices of futures tied to the Dow Jones Industrial Average sank on the
employment news, sending investors scrambling into bonds as the value
of the dollar fell.
The weak report is likely to revive hope among investors that the
Federal Reserve will do more to stimulate the economy later this year.
However, the report by itself likely didn’t send a strong-enough signal
about the economy to spur a change in the Fed’s stance. The central
bank has indicated plans to keep short-term interest rates near zero
into 2014 but reluctance to add to its unconventional bond-buying
programs unless the outlook clearly deteriorates or inflation slows.
The bond-buying programs are meant to drive down long-term interest
rates and encourage spending and investment.
Friday’s reading suggests the job market hasn’t been quite as robust as
earlier reports indicated, but doesn’t point to a stall. Moreover, wage
growth seemed to be firm. It was up 2.1% in March from a year earlier,
right around the Fed’s inflation objective of 2%. Taken together, the
data suggest that while more action by the Fed to boost growth is still
possible, the central bank likely hasn’t moved strongly in that
direction.
The report also added fuel to the presidential race. President Barack
Obama, speaking Fridayat a White House event on women and the economy,
zeroed in on private-sector growth to try to capture a more positive
snapshot of the jobs outlook than the one reflected in the overall
March report. He noted that 4 million private-sector jobs have been
created in the past two years and more than 600,000 in the past three
months.
“We welcome today’s news that our businesses created another 121,000
jobs last month and the unemployment rate ticked down,” Mr. Obama said.
“But it’s clear to every American that there will still be ups and
downs along the way and that we’ve got a lot more work to do.”
The economy is the centerpiece challenge for Mr. Obama in his
re-election fight. His likely Republican opponent this November, Mitt
Romney, has criticized his handling of the economy, and on Friday
Republicans emphasized that the tick down in the unemployment rate was
largely due to people dropping out of the work force. Mr. Romney issued
a statement Friday saying “the Obama economy is not working” and after
having three years to fix it “the president’s excuses have run out.”
The former Massachusetts governor’s charges were echoed by Republicans
in Congress. House Speaker John Boehner (R., Ohio) in a statement said
the report shows that businesses are struggling “because of President
Obama’s failed economic policies.”
Administration officials pushed back against the criticism and
accentuated the positives in the report. Gene Sperling, director of the
White House National Economic Council, said private-sector growth over
the last several months has exceeded White House estimates.
Hiring was lackluster in many industries. Retail-store employment
dropped by 34,000, despite a recent rise in consumer spending, while
construction payrolls fell by 7,000. Temporary-help jobs, often a
bellwether of the job market’s direction, fell by 7,500 after rising by
nearly 55,000 in February.
“This serves as a big reality check for folks that were thinking that
economic growth had ratcheted up to the point where the Federal Reserve
didn’t need to worry so much,” said Mark Vitner, economist at Wells
Fargo Securities.
To be sure, the government’s jobs figures are volatile and subject to
significant revisions. Some economists said mild winter weather and
quirks in the government’s methods for adjusting for seasonality may
have pushed the jobs estimates artificially higher at the start of the
year, making a drop-off inevitable.
The weak report could provide an answer toa question that has perplexed
economists for months: Why is the employment picture improving so
rapidly when economic growth is sluggish? Friday’s report suggests more
economicgrowth may be required for further gains in employment to be
sustainable.
One bright spot was manufacturing jobs, which rose by 37,000, led by
the auto and auto-parts industries. Honda Motor Co. is investing $800
million in new plants in Ohio, Indiana and Alabama, with its Lincoln,
Ala., plant adding 140 jobs, said Edward Miller, a spokesman for Honda.
“We see the economy improving,” he said.
But companies and consumers are likely to proceed cautiously given the
risk of renewed economic woe.
Paul Sayler, sales manager at Milbank Ford & Mercury Inc., a car
dealership in Milbank, S.D., said he is seeing “tremendous traffic” of
customers looking to buy new cars. Two weeks ago, his 11-person firm
held a meeting to decide whether to ramp up hiring to meet the demand.
But they decided against it.
“I’m a pessimist,” the 37-year-old Mr. Sayler said. He worries that
rising gasoline prices will eventually snuff out demand for cars the
way it did in 2008. “Obviously we’re hoping that doesn’t happen.”
—Jon Hilsenrath contributed to this article.
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