U.S. Employment in March Increased at a Slower Pace than Expected

04/10/2012 by Alex Carrick

The U.S. and Canada have been out of sync lately when it comes to their monthly jobs reports.

In most recent months, it’s been the U.S. that has reported large net gains, while Canada has stayed flat. In fact, the accumulation of strong numbers in the U.S. has provided a reason to think that Canada would eventually hit the jackpot as well.  

In March, it finally happened. Statistics Canada reported a large net jump in employment, +82,000. At the same time, the U.S. result was a good deal less exciting than expected, +120,000. Most estimates had been calling for a U.S. figure of +200,000.  

Part of the reason for the soft U.S. number may have been due to the generally fine weather so far this year. On account of the milder conditions, some new jobs may have already been brought forward into January and February.

The U.S. unemployment rate in the latest month dropped one percentage point to 8.2%. That’s a lot better than the 10.1% recorded in October 2009 in the recession’s aftermath, but it remains well above the 5.0% level that has often been achieved in the past.

Canada’s unemployment rate in March fell 0.2 percentage points to stand at 7.2%, lower than in America. But keep in mind that Canada’s rate rarely falls below 6.0%. The U.S. has stricter criteria for counting who is actively looking for work. 

Other numbers on U.S. employment in March were more upbeat than the Department of Labor report. For example, the initial jobless claims figure for the latest week (ending March 31) was the lowest in four years.

The ADP (Automatic Data Processing, Inc.) labor market report – the best-known private sector estimate – concluded 209,000 jobs were created in March, on top of upward revisions in January and February.  

The U.S. has recorded a net gain in employment in 21 of the past 25 months dating back to March 2009. The cumulative increase over that period has been 3.6 million jobs.

The pace has accelerated in the past seven months, amounting to 1.3 million new jobs.

The year-over-year gain in U.S. total employment in March was +1.5%. When the economy is chugging along with few misfires, the increase is usually about +2.0%.

The services side of the economy is already almost achieving that level of jobs growth. Year-over-year services employment in March was +1.9%.

There are several sub-sectors of employment that deserve special mention – on account of the degree to which they are exhibiting better health.   

Manufacturing employment has seen an amazing turnaround. Job gains in the sector have been occurring at a +2.0% year-over-year pace for the past 14 months. In the depths of 2009’s recession, the percentage change was -13.0%.

An important subset of manufacturing is motor vehicle and parts production. Employment in that sector has been creeping up over the past three years. The level may still be barely half what it was at the start of the century, but the year-over-year gain in March was an impressive +7.5%.

The strength in the motor vehicles sector says something about consumer spending. The money to purchase vehicles must be coming from savings and more freely available credit. Furthermore, borrowings are not coming from home equity loans, since prices in residential real estate continue to flounder. 

The most impressive post-recession comeback in employment has been recorded by accounting and bookkeeping services. Since early 2011, the climb in the number of jobs has been incredibly steep, to the point where employment is now higher than it was before the recession.

Computer systems design services (+4.2% year over year) is the other jobs category where employment has been exceptionally strong, +4.2% year over year. The level dipped only slightly in 2009 and is now well above where it was before the recession.

Why the strength in the latter two types of work? With respect to accounting, one logical explanation would be if there were a great number of new taxation and reporting regulations that need to be assessed and monitored. That might be the case in the financial community, where there are tighter controls on the operations and capitalizations of banks.

Across the broader economy, however, I think speculation leads in another direction. Firms have been making large profits and are sitting on a lot of cash. Now comes the strategizing. How to implement the plans and production processes to ensure future prosperity? That’s where both computer systems and accounting functions come into play.

Finally, March’s employment number in the U.S. gives rise to one big question. Was it simply a brief pause or does it signal more trouble for the economy ahead? On account of debt-weakened Europe, slower growth in China, high gasoline prices and a feeble domestic housing market, will 2012 growth be more of a struggle than hoped for?

If such is judged to be the case, the calls for more monetary easing by the Federal Reserve (i.e., a QE3 round of printing money) will become more incessant.

U.S.: month-to-month total job creation
U.S.: month-to-month total job creation
Over the past 20 years, the U.S. economy has generated, on average, 100,000 new jobs per month or 1.2 million new jobs per year.
Source: Payroll Survey, U.S. Bureau of Labor Statistics (Department of Labor)./Chart: Reed Construction Data - CanaData.
Canada vs. U.S. monthly unemployment rate (per cent)
seasonally adjusted data
Canada vs. U.S. monthly unemployment rate (per cent)
Data sources (seasonally adjusted): Statistics Canada and U.S. Bureau of Labor Statistics/Chart: Reed Construction Data - CanaData.
U.S. total employment - level
(based on seasonally adjusted data)
U.S. total employment - level (based on seasonally adjusted data)
Data source: Payroll Survey, Bureau of Labor Statistics (U.S. Department of Labor). / Chart: Reed Construction Data - CanaData.
U.S. employment: accounting and bookkeeping services - level
(based on seasonally adjusted data)
U.S. employment: accounting and bookkeeping services - level (based on seasonally adjusted data)
Data source: Payroll Survey, Bureau of Labor Statistics (U.S. Department of Labor). / Chart: Reed Construction Data - CanaData.
U.S. employment: computer systems design services - level
(based on seasonally adjusted data)
U.S. employment: computer systems design services - level based on seasonally adjusted data)
Data source: Payroll Survey, Bureau of Labor Statistics (U.S. Department of Labor). / Chart: Reed Construction Data - CanaData.