Jobs Report Take Away: You Won't Find Work

NEW YORK ( TheStreet) -- The March jobs report offered unemployed Americans an unsympathetic reminder: keep searching.

Nonfarm payrolls in March increased by just 88,000, while economists surveyed by Thomson Reuters were expecting 200,000. And while the headline unemployment rate edged lower to 7.6%, from 7.7%, the Bureau of Labor Statistics said 496,000 individuals dropped from the labor force to bring the total number of citizens down to 90.48 million.

"I'm really surprised by it, I have to say. If you look at where the GDP and demand is striking in the first quarter, we're probably going to see first quarter GDP growth in excess of 3.5%," Aneta Markowska, chief U.S. economist at Societe Generale, said in an interview.

Economists, investment strategists and a politician in interviews said they were optimistic about steady labor growth over the long term, but admitted that the March report was a reminder that job-hunters still face a challenging market.

March marked a 10-month low in employment growth, which on Friday sank major U.S. equity indices, led the FTSE in London and DAX in Frankfurt into deeper losses, and pushed the 10-year Treasury yield down to near 1.7%, while lifting gold to a two-week high.

ADP on Wednesday said that private sector payrolls in March rose by 158,000, which was less than the 200,000 that economists surveyed by Thomson Reuters were expecting. Jobless claims for the week ended March 30 jumped to 385,000, and the four-week moving average climbed 11,250 week-over-week for its highest level in 2013.

"In terms of people saying it's still tough to get a job and it doesn't feel like a very good market, I would say that's absolutely the case," said Kate Warne, an investment strategist at Edward Jones. "The good news is it hasn't gotten worse, it's still making improvement, it's just not doing it at a pace that all of us would like to see."

The White House issued its monthly response to the Bureau of Labor Statistics' employment situation with a written statement from Alan Krueger, chairman of Barack Obama's Council of Economic Advisers, who refrained from a cheerful response. Krueger's predecessor, Austan Goolsbee, on CNBC called the report a punch to the gut.

In 2012, an election year, Democrats outside the White House found ways to remain optimistic about soft employment reports as the economy remained a critical campaign issue across most states and Congressional districts. Members of the president's party didn't hesitate to admit Friday's report was rough, but they did shift blame to the sequester cuts.

"I don't think there's any question, rather, there's a connection between this anemic jobs report and the fact the sequester took effect March 1," Rep. Rob Andrews (D., N.J.), ranking Democrat on the House subcommittee on health, employment, labor and pensions, said in an interview.

The nonpartisan Congressional Budget Office in February 2013 estimated that GDP growth would accelerate by 0.6 percentage points in the absence of the sequestration -- automatic, across-the-board spending cuts implemented by Congress -- but economists aren't yet certain of effect the spending cuts will have on the U.S. economy.

"No one knows. Democrats are going to say, 'Well, yeah, it's because of sequestration,' and they're going to blame the Republicans, but the sequestration wasn't the Republicans' fault," said Bob Brusca, chief economist of Fact & Opinion Economics. "Sequestration is a failure of Congress to come to on a plan -- a booby trap that it set for itself."

Brusca said that the labor force participation rate's deterioration is disconcerting and proof that the U.S. economy isn't poised to boom any time soon.

"It's not the job-creation numbers that worry me the most -- although they're very bad -- it's the labor force participation figures; those to me are tragic," said Dan Mitchell, senior fellow at the libertarian think-tank Cato Institute.

The participation rate in March dropped to 63.3%, its lowest level since 1979.

There were bright spots in the report.

February's nonfarm payrolls received an upward revision to 268,000 new jobs, from the robust 236,000 mark first reported last month. Payroll numbers for January also received a boost to 148,000, from the earlier estimate of 119,000.

Professional and business services added 51,000 jobs in March to lift 12-month employment in the industry to 533,000. Construction employment gained, while the leisure and hospitality sector added jobs.

"I would say new job growth was well diversified across industries; the revisions from January and February were certainly a positive point," said Dave Roda, a regional chief investment officer at Wells Fargo Private Bank.

While weak, labor remains in an upwardly trending cycle.

"I think just psychologically here we're at a very nasty juncture, because you have now shifted away from new all-time highs in stocks to now the economy being weak," said Michael Gayed, chief investment strategist at Pension Partners, LLC.

The March employment situation served a stark reminder that, while investors have ridden one of the best quarters for stocks since the financial crisis, America's unemployed still haven't escaped the destruction of the Great Recession.

-- Written by Joe Deaux in New York.

>Contact by Email.