Last month the jobs report was mixed. Payroll growth was strong but the decline in the unemployment rate was too reliant on workers leaving the labor force. This month the report is bad. In March payroll employment increased by 88,000, roughly half of expectations, continuing the pattern of an economy that adds jobs in fits and starts. The unemployment rate declined another tenth in March to 7.6% but this was driven by 496,000 people dropping out of the labor force.
The labor force participation rate declined to 63.3% in March after averaging 66% in the years before the recession. The bulk of the declines in the labor force are among workers in their prime working years between the ages of 25 and 54. Labor force participation rates for workers age 55 and above have been flat or increasing.
One bad month doesn’t doom the prospects for the economic recovery (January and February were revised up by 61,000 jobs) but the seesaw nature of job growth we’ve seen over the last two years does put a cloud over the strength we’ve seen in the last few months. And as the year unfolds and the across the board government spending cuts known as the sequester begin to pinch the risks to the labor market are tilted to the downside.
One bright spot in the report was the homebuilding sector. Homebuilding payrolls increased by 14,800 in March. This brings the total number of homebuilding jobs added in the last six months to nearly 74,000. As the housing recovery has gained momentum since last year homebuilding is finally adding to rather than subtracting from economic growth. With plenty of recovery still ahead of us the homebuilding sector is expected to continue adding jobs and making a positive contribution to the broader economic recovery.