WASHINGTON — A disappointing March jobs report Friday, marked by a sharp slowdown in hiring and shrinking labor-force participation, triggered new debate over the strength of the economic recovery.
Mainstream economists had expected the report to show between 180,000 to 200,000 new jobs to have been created last month, but the Labor Department reported that employment increased by just 88,000 jobs nationwide.
The worse-than-expected numbers, coming off a February when 236,000 jobs were created, sparked an early sell-off on Wall Street. But prices recovered during a day of volatile trading to close only modestly lower.
In the past 12 months, hiring had averaged 169,000 new jobs per month — February’s strong number was also revised upward — so the weak March statistic suggested to some a very rapid slowdown that eclipsed a slight decline in the unemployment rate, 0.1 of a percentage point, to 7.6 percent.
Most Read Business Stories
Mark Zandi, chief economist for forecaster Moody’s Analytics, said the job market faces still more challenges in the months ahead, citing both government budget cuts and the impact of health-care legislation.
“The weak March job gain presages weaker job gains this spring and summer,” he said. “Fallout from the (budget) sequester has yet to hit, and adjustment to health-care reform by small businesses will weigh on jobs for much of the year.”
That’s likely to be the case, even allowing for the impact in March of unusually cold weather, Zandi said.
“The March number overstates any weakness, cold weather likely hurt retail employment, and there were significant upward revisions to past months, but job growth will throttle back in coming months,” he said.
Not everyone was worried by the poor monthly showing, however. Neil Dutta, head of economic research for Renaissance Macro Research in New York, cautioned that recoveries don’t move in a straight line.
“From 2004 to 2006, when the labor recovery hit its stride in the last expansion, private employment registered a monthly gain of sub-100,000 a total of 11 times. So, roughly one-third of the time in the last labor-market recovery, private employment came in below 100,000,” Dutta said.
“Yes, that jobs recession was shallower, hence the softer recovery. But let this serve as a reminder that payrolls are volatile. Since 2011, we’ve seen two sub-100 private payroll prints in addition to this one; that’s roughly 11 percent the time.”
But many others found the report from the Bureau of Labor Statistics jarring.
“This is an extremely troubling labor-market report, given how strongly stocks have rallied, and how much expectations have been lifted with optimism around the consumer and housing. This report … calls this whole thesis into question,” said Scott Anderson, chief economist for Bank of the West in San Francisco.
“The negative impact of the (budget) sequester is readily apparent in these numbers, and we can expect more economic difficulty and job loss in the months ahead.”
The budget sequester took effect March 1 and cut $85 billion in federal spending throughout the federal government, with the exception of Congress and its staff.
The Defense Department plans furloughs for its civilian labor force this month, and the prospect of another $100 billion in cuts scheduled to begin Oct. 1, absent a budget deal, have dampened spending by businesses and consumers, many of whose jobs depend on government or government purchasing.