There's a Serious Catch in the Jobs Report — And No One Is Talking About It
The March NFP has enough holes in it to not be considered anything close to a 'blowout' report. Let's take a deep dive into the numbers, warts and all.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
On Friday morning, the Bureau of Labor Statistics, which is an agency within an agency (the Department of Labor), released the results of their employment situation surveys for the month of March. At the headline, the data is much stronger than expected. Looking into the data, this is still a fairly strong report. Inspecting the data closely, however, there are some truly awful bits of information within that do cast a pall of negativity over the report from certain perspectives.
Treasury yields have spiked higher in response to the headline numbers, while equity index futures pretty much stayed where they were, which was up small after Thursday's bloodletting.
As for job creation, the Non-Farm Payrolls number, which is part of the Establishment Survey, showed a seasonally adjusted 303K jobs created. The downward revisions to past months that we have become accustomed to, did not really materialize this month. February was revised down 5K, while January was revised up 27K for a net "gain" of 22K jobs. This is a sizable beat of the consensus view for slightly more than 200K.
Glancing at the Household survey, which has consistently printed job creation numbers well below the Non-Farm Payrolls number, we see that this trend also stopped this month. The Household survey shows 498K more employed persons for March, up from -184K jobs for February. Unemployed persons for March printed at -29K down from +334K in February. Clearly, in terms of net jobs, March was much stronger than February and was generally strong.
There is a serious catch within the job creation numbers, though, which is not really being discussed this morning across the financial media. Part-time jobs showed a massive increase of 525K for March, up from an increase of 107K in February. That means that full-time jobs were lost on a net basis in March. Even using the Household print, full-time jobs decreased by 27K in March. Using Non-Farm Payrolls... the U.S. economy lost 222K full-time jobs in March.
Is That Inflationary?
Good question. More folks are working. That's inflationary. A lot of folks have been downgraded by their employers from full-time to part-time. That's deflationary. This large increase in part-time labor is evidenced by the increase in average weekly hours from 34.3 hours to 34.4 as more is being asked of fewer full-timers.
Additionally, Participation increased from 62.5% to 62.7%. That's a huge increase over one month. What's especially impressive is the fact that unemployment dropped to 3.8% from 3.9% and underemployment remained at 7.3% despite the increased participation. That's probably mildly inflationary.
What is becoming less inflationary is wage growth. While still growing faster than the current pace of consumer level inflation, month-over-month wage growth landed at 0.3% which was expected, while year-over-year wage growth decreased to 4.1% from 4.3% in February,
More Warts Within
Looking into the educational demographics of March labor, unemployment dropped significantly for those with less than a high school diploma, while dropping slightly for high school graduates and those who have completed a bachelor's degree or beyond. However, those who finished high school and started but did not complete college took a fairly sharp hit.
As to the racial demographics of March labor, Whites or Caucasians saw no change in their unemployment rate, while both Asians and Hispanics or Latinos made significant gains. However, Black or African American unemployment soared from 5.6% in February to 6.4% in March.
Bottom Line
This report has enough holes in it to not be considered anything close to a "blowout" report, as I just heard it described as on one of the financial TV networks. That said, it is strong enough to maintain the recent trajectory for both GDI and GDP. In other words, this report still reflects economic expansion. Wage growth slowed, but for full-timers at least, is still running ahead of the current pace of inflation.
This week, the Fed speakers that we have heard from have tested the waters of how markets would react should there be just one or even no short-term rate cuts this calendar year. I don't think this changes any of that one bit. Inflation remains warm.
We'll hear from the same BLS on March CPI and PPI next week. Economic growth/activity, after really running much closer to recession than most people realized for most of 2022 and at least the first half of 2023, is no longer as close to entering into contraction.
Things can change. That said, commodities are trading higher of late on a stronger dollar. That's inflationary on steroids. Growth is there.
This economy is by no means doing extraordinarily well, but it is not in crisis nor is it close to being in crisis. It has to be said that it is also impossible to truly measure the impact on labor markets of the massive, unchecked influx of illegal immigrants that have poured into the country. No illegal is contributing to the Household survey and no employer who is hiring illegals is going to honestly contribute to the Establishment survey.
That said, to cut rates in this environment would be entirely political, would be aimed at enabling the federal government at the expense of the public, and would confirm what we have always feared — the loss of central bank independence in the United States.
At the time of publication, Guilfoyle had no positions in any securities mentioned.
