Eye on the Economy: Weak Employment Gains in March

The March employment report disappointed most economists, casting some doubt on the strength of the labor market. The Bureau of Labor Statistics reported that payroll employment expanded by only 126,000 positions, with downward revisions totaling 69,000 for previously reported jobs gains in January and February.

While the unemployment rate held steady at 5.5%, the downshift in the size of monthly job gains along with continued declines in labor force participation raises the question whether the miss for the March report represents a one-off blip in the data or whether the labor market has not been performing as well as many analysts had previously assumed.

With no obvious factors, including weather issues, to blame for the slowdown in job growth in March, the most likely conclusion is that the economy and the labor market continue to improve, albeit at a slower pace than hoped.

Recent labor data from the construction market mirror some of these broader trends. In March, the residential construction industry employment (builders and specialty contractors) declined by 2,800 positions on a seasonally adjusted basis, the first monthly decline since May 2012. However, employers are seeking new workers, as the BLS JOLTS survey indicates that as of February, the number of open construction positions totaled 160,000, the highest tally since July 2007.

The rate of open positions for the overall economy was 3.5% of total employment as of February, a cycle high according to the JOLTS data. So while total employment growth slowed in March, employers are actively seeking new workers, which suggests job gains in the months ahead. The March miss also raises the probability that the Federal Reserve will delay interest rate hikes widely expected later this year.

Other economic indicators offer more positive news for housing. The National Association of Realtors Pending Home Sales Index increased 3.1% in February and is 12% stronger than a year prior. Home price gains continue, although at increasingly slower rates. The rise in pending sales matches ongoing increases in consumer confidence.

The Federal Housing Finance Agency measure of home prices rose by 5.1% on a 12-month seasonally adjusted basis for January, the 36th consecutive month of year-over-year gains. Similarly, the Case-Shiller national index was up 4.5%, with prices being 22.1% higher over the last two-and-half years.

Housing’s share of GDP for the final quarter of 2014 stood at 15.25%, with home building and remodeling yielding 3.09 percentage points of that total. The home building component continues to be driven by gains by completed multifamily properties. According to Bureau of Economic Analysis data of construction spending on completed projects, the pace multifamily construction spending increased 31.5% over the 12 months ending February 2015, while single-family spending is up 9.7%.



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