Is the sky falling?
That’s what you might think from the reaction to the employment statistics released Friday. Instead of adding 200 thousand jobs as predicted, the economy only added 120 thousand jobs in March. Is this the first step towards a double dip?
Certainly the risks of a slowdown have increased. Back six months ago many observers were quite loudly announcing that another recession was at hand. Job growth had slowed from over 200 thousand per month in the first quarter to less than 100 thousand. But that was largely a result of the tsunami-led slowdown in manufacturing, where automakers just couldn’t get the parts. The disaster’s effects rippled through the economy and faked out some of the early indicators.
This time there’s no tsunami, but it still looks like a fake-out. Job growth began to accelerate last fall, and looked like it was set to begin a virtuous cycle of more jobs leading to more spending leading to more jobs. But a big part of that was seasonal factors: the winter was milder than usual in much of the country, so the seasonally adjusted numbers—what we normally depend on to smooth out the effects of the weather and holidays—looked like they were a lot better than expected. Now that spring is here, the numbers are looking for their seasonal rebound, but it’s already happened. We had spring in February. So what looks like a downturn, isn’t.
To get into the weeds of the report, retail employment looked like it pulled back during the month by some 35 thousand jobs, in spite of solid retail sales. But that was just in the seasonally adjusted numbers. In actuality, retail establishments hired some 25 thousand workers during the month—but the adjustments erased those hires. Retailers hired sooner in the season, and didn’t need to staff up as much as usual during March. A similar effect—although smaller—could be observed in construction.
We weren’t booming this winter and we’re not busting now. The economy is muddling along, growing modestly. The US markets should muddle along as well.
Douglas R. Tengdin, CFA
Chief Investment Officer
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