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March Jobs Revert to the Mean

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Friday, April 6, 2018

After a new jobs extravaganza last month, revised up from 313K originally reported in February to 326K, this morning’s March Bureau of Labor Statistics (BLS) non-farm payroll report saw just 103K new jobs. This, with long-term jobs gains month over month for most of the past couple years of 180-200K, is what we call a “reversion to the mean.”

The Unemployment Rate stayed consistent at 4.1% for the month. Average hourly earnings rose another 0.3% month over month, +2.7% year over year. The Labor Force Participation Rate ticked up 0.2% to 62.9% in March. The U-6 number (aka “real” unemployment) ticked down to 8.0%, and the labor force overall fell 158K. None of these figures jump to the eye as obvious outliers; in fact, they all point directly to a relative calibration of overall jobs trends. Over the past 3 months, we’re averaging 202K job growth domestically. Don’t let today’s disappointing headline detract from the fact that our labor market is historically very sturdy.

The private sector brought 102K of the 103K total new jobs in March, with Professional/Business Services leading the way with 33K increased employment. Healthcare brought 22K in March, as did the long-dormant Manufacturing sector. Construction fell 15K in the month, but this is down from a very strong +65K in February, for a 2-month takeaway of +50K. Construction jobs are also quite often temporary in nature, so we expect fluctuation in these figures.

We’re looking at market futures in negative territory, but we were before the BLS numbers were released, anyway. Unlike in January — when strong wage growth accompanied a better-than-expected headline number (revised down 63K, by the way, from 239K originally reported to 176K today) — where we saw market participants run for the hills on fears the Fed was going to get aggressive in raising interest rates higher and more often this year, today’s figures, while lower than expected, will not have much of an effect on market sentiment.

At least, not compared to the specter of a trade war with China. Jobs are balancing out, month over month. Investors may have their share of trepidations these days, but the labor market is not one of them.

Mark Vickery
Senior Editor

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