Declining Labor Participation Remains a Key Qualifier

The March employment report surprised to the downside. The US economy added 126,000 jobs during the month, the smallest net increase in two years. In contrast, economists’ projections had centered on payroll gains of 245,000 jobs, a number more consistent with the last twelve months’ healthy run. Stocks shrugged off the miss while yields on Treasuries slipped in anticipation of a more patient Federal Open Market Committee. Needless to say, one month does not make a trend. Several other measures of the labor market, including first-time unemployment claims, suggest we are still moving in the right direction, albeit without tremendous momentum. 

Goods-producing occupations, which had been growing at a faster pace than service jobs for the better part of the last year, were an observable drag on the March headline, declining by 13,000 jobs during the month. Mining dropped 11,000 jobs and is down 30,000 jobs so far in 2015. To the extent those losses can be tied to commodity prices, we can take heart that lower energy costs are an overwhelming net positive for the US economy, even if some occupations or regions of the country are impacted negatively.