The labor market at long last posted a month of job creation that’s immune to second guessing, or so it seems. Nonfarm payrolls rose by 162,000 in March, the Labor Department reported this morning. That’s the biggest monthly advance in three years and the first convincing evidence since the recession began more than two years ago that the job market is recovering.
The revised employment numbers show that the economy added 14,000 jobs in January and 64,000 last November. But March's six-digit increase is the first compelling news that the labor market is growing and that the underlying numerical details aren't merely statistical quirks.
That said, one encouraging report doesn’t wipe away a two-year run of the longest and deepest contraction in the labor market since the Great Depression. But there’s no denying that today’s net gain in nonfarm payrolls appears to mark the end of job destruction. Deciding if this is a preview of things to come, or not, remains to be seen.
Only time will tell if the economy can continue to mint new jobs at a comparable pace in the months and years to come. In fact, simply returning the country’s nonfarm employment to levels that prevailed before the Great Recession in a timely fashion requires substantially higher numbers of job creation than the 162,000 increase logged in March. As of last month, nonfarm payrolls are still lighter by 8.2 million compared with December 2007, when the economy entered recession, according to NBER.
It’ll take time to assess the labor market’s return to growth, or even if it has legs. But judging by today’s numbers, the economy appears to have turned a corner. Indeed, the job creation was spread across economic sectors, suggesting that the positive change reflected broad economic momentum. The services industry led the rise, posting an increase of 82,000. The cyclically sensitive goods-producing sector reported a lower but still handsome advance of 41,000.
"Labor markets have shifted to expansion mode," Aaron Smith, a senior economist at Moody’s Economy.com, told Bloomberg News. "Some of the increase was payback for weather but more encouraging is that the recovery in hiring is spreading quickly across industries."
As encouraging as today’s jobs report looks, it’s important to remember that the enthusiasm is partly or perhaps largely a byproduct of relativity. It’s been well over two years since we’ve seen net gains of this magnitude in the monthly employment reports. That makes today’s news unusual by the standards of recent history, not to mention welcome. But a rise of 162,000 in payrolls in the grand scheme of American economic history is middling. A number of economic projections advise that 100,000 new jobs a month is necessary simply to soak up the growth in the civilian labor pool. Add to that, say, the 200,000 new jobs a month needed to repair the damage over the past two years and a back-of-the-envelope calculation suggests that today’s update, encouraging as it is, is at a minimum about half as much as what’s needed on a sustained basis over the next several years.
Meantime, one month of modest improvement a trend does not make. There are several reasons to second-guess the latest payroll number. That starts with the fact that roughly a third of the gain in jobs last month is due to temporary hirings for the once-in-a-decade census review. And there’s also questions about whether February’s snowstorms delayed hiring by a month, delivering a one-time boost to March’s numbers. Also, let's not forget that the unemployment rate didn't budge last month, sticking to an unchanged 9.7% in March—despite the net job creation.
In any case, it could have been a lot worse. Still, it needs to be quite a bit better, and for years.
"We have had this massive disaster, but we’re at a place now where things are stabilizing," Heidi Shierholz, an economist at the Economic Policy Institute, tells The New York Times. "But it’s nowhere near the level of growth we need to start moving the dial."
This article has been republished from James Picerno's blog, The Capital Spectator.