Unemployment Falls to 29-Year Low

The unemployment rate dropped to 4.2% in March, despite a weak 46,000 gain in payrolls.
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Nonfarm payroll employment grew by 46,000 in March, according to the

Bureau of Labor Statistics

, much less than expected. The consensus was for an increase of 166,000, according to


. In addition, February's figure was revised upward to 297,000 from an original 275,000. The

household unemployment rate

fell to 4.2%, the lowest since February 1970, and with seasonal adjustments affecting the nonfarm payroll figures, this is a more appropriate gauge of the labor market.

Seasonal adjustment factors were expected to wreak havoc on this month's data, as they did at this time last year. The

Labor Department

develops seasonal adjustment practices based on the past several years' experiences. Unfortunately, when mild weather occurs in the winter months, the use of these seasonal adjustments tends to make the gains in those months overstated. Construction jobs added back into the payrolls due to mild weather in January and February are thus not counted in March, so the month's poor performance is a bit exaggerated. The construction sector lost 47,000 jobs this month, according to the Labor Department.

The manufacturing sector turned in a 35,000 loss. So while sentiment is improving in the sector, exemplified by the recent strength of the national and Chicago purchasing managers indices -- both effective gauges of strength in the manufacturing sector of the economy -- employment hasn't turned the corner yet. Not surprisingly, the service sector remained the strongest, showing a 135,000 increase in nonfarm payrolls, compared with a revised 277,000 increase in February.

The year-on-year rate of increase in

average hourly earnings

was 3.6%, down from 3.7% in February. For the month, average hourly earnings rose 3 cents, or 0.2%, to $13.09.

The final component of the report, the

average hourly workweek

, dipped slightly to 34.5 hours a week from February's revised 34.6.