Nonfarm payrolls: Economy finally creating jobs

** Nonfarm payrolls rose 162,000 in March, while employment in the prior two months was upwardly revised by 62,000. Private payrolls increased 123,000 in March (Census hiring was only 48,000), the third straight increase.

** The unemployment rate remained unchanged at 9.7% in March, even as labor force participation rose to 64.9% from 64.8% (household employment rose 264,000 in March and has risen an average of 371,000 per month over the last three months.

BOTTOM LINE: The economy has started creating jobs and the gains were broad-based in March—the question to be answered is at what pace? With the impact of temporary Census hiring likely to dominate the headlines over the next few months (although curiously muted in March), the focus on payrolls should be the private payroll gain and, with weather distortions, at a minimum, we should average through the first quarter to see the underlying trend. Private payrolls have increased in each of the last three months—on average by 49,000 per month. The household survey shows much greater employment strength—averaging gains of 371,000 per month (and adjusting to a payroll basis by removing self-employment and adding multiple workers, it is an even stronger 429,000 per month)—while labor force participation has risen in each of the last three months (thus the unemployment rate has dropped from 10.0% in December to 9.7% even as the workforce has swollen by 851,000). Our suspicions are that payroll employment is being underestimated in the recovery as it was overestimated in the recession. The naysayers will point to the decline in average hourly earnings, but the impact on incomes will be dominated by the increase in hours worked (from the Fed’s perspective, all the more reason to keep rates on hold).

Source RDQ


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