Many consider March’s job report a disappointment. According to the Bureau of Labor Statistics, the economy added 103,000 jobs in March – a number much lower than economists’ expectations of 193,000. Not only did it fall short of expectations, it was the fewest jobs created in six months and a big drop from the blockbuster month of February.
Continue Reading Below
But it may actually be a signal that it’s time to change our expectations. We need to look at the bigger picture and not read too much into the month-to-month variations, which can sometimes be misreported and misinterpreted. For example, in this most recent job report the Labor Bureau revised both the January and February tally resulting in the economy creating 50,000 fewer jobs that previously reported.
Instead of agonizing over monthly variations, we should focus more on the number of Americans who are already working or who are looking for jobs, referred to as the labor participation rate. And it’s here where the problem lies. March’s participation rate came in at 62.9%, but that level is the worst since before the recession of 2009.
Peter Boockvaar, chief investment officer at Bleakley Advisory Group, highlighted this issue in his note on the March job numbers: “Reflective of a continued tightening in the market for labor, the pool of available labor fell by 156,000 to the lowest level since October 2007.”
Fewer Americans are looking for jobs. And they’re not being put off by a shortage – there is now a position for every unemployed person in the country, according to Dan North, chief economist at Euler Hermes North America. The largest contributing factor is the aging baby boomers, who are retiring and will continue to do so for another decade. Millennials are working (even though they are prone to job hopping), but it’s the following generation that saw a smaller number of births. The result? More Americans are retiring and fewer are being added to the workforce. And let’s not forget that this is happening at a time when foreign immigration is low.
Mark Hamrick, a senior economic analyst at Bankrate.com said that the economy isn’t likely to keep churning out 300,000-plus jobs each month. And Jed Kolko, the chief economist at Indeed, agreed, saying that we should lower our expectations: “Eventually, we’ll have to get used to monthly job gains of 100,000 or less.”
Despite the disappointing figure announced today, there was little reaction from the markets (partly because Trump’s new tariff plan is gaining all the attention). A slight increase in earnings, with a 2.7% increase compared to this time last year, is enough to suggest that the U.S. job market remains strong. Investors are probably waiting to get a better idea of how the job growth rate will affect U.S. Federal Reserve policy, which will come after Jerome Powell addresses the Economic Club of Chicago on Friday afternoon.
As the economy continues to strengthen, companies may have to learn to work with fewer employees (increased automation), be better at job retention, loosen hiring requirements or consider overlooked potential employees like people with criminal records, recent retirees or at-home parents. It’s time to get creative as this labor market tightens.