Employment report disappointing, but not a reason for panic

The employment report on Friday as indeed a bit of a disappointment, with only an addition of 120,000 jobs, it most definitely wasn’t what economists were hoping for.

The most positive point of the employment report was the drop in the unemployment rate from 8.3 to 8.2 percent. This, however, was offset by the fact that most of this seeming progress was from job seekers dropping out of the job search altogether. This report shook up investors a little, and there was even talk about the Fed coming to the rescue once again. This could be done through bond buying or “Operation Twist”, in simple terms, exchanging short term bonds for long term bonds.

Despite this less than great report on the unemployment rate, this will in all likeliness not be enough to push the Fed into another round of assistance. Despite the political use of this new data, the economy is not in serious danger.

Looking at one month of data is downright stupid. One must look at trends and data from a  wider range to get any real meaning form it. Here are some reasons why the report is no reason for panic:

  • The weather. As stated before, the comparatively warm winter probably played a role in March’s report. This is due to the fact that more people were hired in the previous months, leaving less room for future employees.
  • Most industries are still hiring. Out of 266 industries, almost two thirds were hiring. There were large job losses in only a few industries. Retail jobs fell by 32,000 and contraction fell by 11,000.
  • Government hiring. The government cut 265,000 jobs in 20111. However, job cuts for march in this sector were only 1,000 in March. The previous month showed an increase of 7,000.
  • The overall trends are still quite positive. Over that past 3 months employment has still increased by an average of 212,000
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