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The March Employment Report: Here's the Real Story with the U.S. Unemployment Rate

Friday, April 6, 2012 15:41

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Fewer workers are marching in the unemployment line, but the March employment report shows that many are not yet returning to work.

U.S. employers added 120,000 jobs in March, pushing the U.S. unemployment rate down to 8.2%, the Labor Department reported today (Friday). Economists were looking for 210,000 jobs to be added in March, and the unemployment rate to stay at 8.3% as more discouraged workers reentered the job market.

Most market participants will have to wait until Monday to react to the disappointing numbers as exchanges are closed in observance of the Good Friday holiday. However, the bond market is open in a shortened trading session, and the Dow futures tumbled some 111 points following the release.

The less than stellar March employment report conflicts with several recent private surveys that show the economy is improving.

The March Employment Report Numbers

In the previous month, employers added 227,000, slightly more than expected. February capped the best six-month streak for job additions since the height of the financial crisis in 2008.

Michael Erwin of CareerBuilder recently told ABC News, “Thirty percent of employers we spoke to say they plan to hire full-time positions in the second quarter.” That compares with 24% in the last survey three months ago.

Erwin added, “The numbers are going back to where they were pre-recession so that’s good news employers are back to the table, they’re looking to hire.”

Jobless claims are now down to their lowest level in four years, after falling to 357,000 in the final week of March, the Labor Department said Thursday in advance of the monthly jobs report.

While the decline in unemployment insurance claims is good news, it does not tell the whole story.

The Real Story with U.S. Unemployment Rate

Firms drastically cut their workforces over the past two years and have not replaced, and in many cases do not plan to replace, those laid off.

“The biggest problem we have is not high layoffs, but low rates of hiring,” Stephen Bronas, a senior economist with Welch Consulting, told ABC News.

What market analysts were closely digesting in Friday’s report were the total jobs added and the unemployment rate. But Zacks Investment Research said that while both of these numbers are important, and both have been improving since October, another key data point that ought to be scrutinized is the labor force participation rate.

The labor force participation rate is defined as the percentage of the population age 16 and older working or actively seeking work. It does not count those who are discouraged and have simply ceased seeking employment.

The rate rose steadily in the 1970s and 1980s, but since the Great Recession it has fallen dramatically and continues to tread lower.

The downward drift explains, in part, some of the reasons for the falling unemployment rate, according to Zacks. But, when those downtrodden men and women who were too dejected to look for work decide to spruce up their resumes and start hitting the pavement and Internet again hunting for a job, the U.S. unemployment rate is destined to stay elevated.

The long-term implication of a low labor force participation rate is economic repercussions in growth, something the ailing U.S. economy has been hoping to revive for several years now.

Recent headlines – and the Obama administration – tout that the unemployment rate has been steadily declining from highs reached during the peak of the recent economic crisis. What isn’t being reported as extensively is that a majority of the drops seen over the last several months can be attributed to the hundreds of thousands of people who have fallen off the radar.

Scores have left the workforce and are not being counted because they have exhausted their unemployment benefits. Some have simply given up trying to find work. Others have taken part-time or temporary jobs.

And then there are those who are “underemployed,” working at jobs they are much too qualified for or working in occupations that are paying significantly less than what they previously made or should be earning.

In addition, new graduates are vying for hard-to-come-by jobs. People don’t quit during a recession and many older workers are delaying retirement, leaving new grads out in the cold.

So while it is good news that our ailing economy appears to be adding jobs, don’t be fooled. The numbers are skewed and misleading.

At 8.3%, the U.S. unemployment rate still remains extremely dire. So before you break out the horns and party hats, delve a bit deeper for the real picture – when the March employment report is concerned, the devil is in the details.

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