The Breakdown

Explaining Southern California's economy

March jobs report: The bad news and the good news

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31489 full

Well, I wasn't even close. Yesterday, I predicted that we'd see another decent if not spectacular jobs report from the Bureau of Labor Statistics. My number was 225,000 jobs added. But the actual number, released by the BLS this morning, is miles lower then that: 120,000.

That's the bad news. The good news, if you can call it that, is that the national unemployment rate fell to 8.2 percent from 8.3 percent. But that's just because more than 120,000 Americans quit looking for work. (Did I say this was the good news part?)

There was some truly good news. The trend of the BLS revising up the previous month's result continues: a gain of 227,000 jobs was originally reported for February, but that number has been adjusted to 240,000.

It's a good thing the markets are closed today for Good Friday, as this "surprise to the downside" — given that most economists who follow the labor market expected another month of 200,000-plus new jobs in March — may very well not have been priced in (basically, already accounted for), given that the major stock indexes shed some gains this week.

So what's the takeaway? Two things could be going on here: The economy could be in a holding pattern, waiting for additional government action — which isn't going to come from the President and Congress, not in an election year. The Federal Reserve, after backing off another round of "quantitative easing," may take another look at that strategy. The bottom line is that there simply isn't enough demand out there, beyond cars and washing machines ("durable" goods that consumers hang on to for several years), to support a level of hiring closer to what the economy needs to get back to pre-crisis levels. For that, we'd need to see more like 400,000 new jobs per month.

But there's a more troubling possibility, which is that GDP growth, after surging to 3 percent in the fourth quarter of 2011, has retreated to barely 2 percent — just enough to keep the economy in positive territory but not enough to accelerate the dismal employment situation. Ominously, we could be in for an ever-so-slightly better performance than in 2011, when GDP averaged less than 2 percent for the entire year and brought on a phenomenon I call "stuckflation" — a low-inflation economy that nevertheless isn't going anywhere.

Of course, March could be a blip, a disappointing BLS report in the midst of an overall improving trend. Come April, we'll pick up the pace and get back to 200,000-plus new jobs per month. That's the optimistic scenario. The pessimistic scenario is that business confidence is extremely fragile and subject to any little wobble, at least in terms of hiring. Because on the positive side, the data have been showing for a while now that the pace of firings and layoffs has slowed.

So despite the fact that the auto industry (arguably the strongest part of the entire economy) and...bars and restaurants are hiring at a nice clip, there are still 12.7 million people unemployed in the U.S. It could take a decade to repair this damage, if we have more months like March. If you plan on going to college and graduating in the next ten years, this isn't something you want to confront.

What does the bad March report mean for California? Well, we're likely to see our state unemployment level unchanged at 10.9 percent. That's among the worst in the nation. And it's worse in Los Angeles County, at about 12 percent. Remember, we got hit hard by the housing and related construction downturn. So we're going to suffer in double-digits for months and maybe years to come. 

Follow Matthew DeBord and the DeBord Report on Twitter.

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