04.06.07
Economic Trends
The Employment Situation
Nonfarm payroll employment increased by 180,000 in March, stronger than predicted (+130,000) after February’s weak report. Net upward revisions to January and February’s payrolls (+32,000) brought the quarter’s average growth to 152,000.
Employment in goods-producing industries rose by 43,000 jobs, bolstered by rebounding strength in nonresidential construction. Construction employment as a whole posted the strongest net increase in March (56,000), counteracting February’s weather-related drop of 61,000. Manufacturing continued its downward trend, losing 16,000 jobs.
Employment in service industries increased by 137,000 despite weakness in professional business services, a traditionally strong sector. Professional and business services lost 7,000 jobs, the weakest single-month change growth in that area since November 2004. Education and health care employment showed continued strength, adding 54,000 jobs. Retail trade employment also grew by 36,000.
Labor Market Conditions
| Average monthly change (thousands of employees, NAICS) |
||||||||
|---|---|---|---|---|---|---|---|---|
| 2004 | 2005 | 2006 | Jan-Feb 2007 | Mar 2007 | ||||
| Payroll employment |
172
|
212
|
189
|
138
|
180
|
|||
| Goods-producing |
28
|
32
|
9
|
-17
|
43
|
|||
| Construction |
26
|
35
|
11
|
-14
|
56
|
|||
| Manufacturing |
0
|
-7
|
-7
|
-6
|
-16
|
|||
| Durable goods |
8
|
2
|
0
|
-12
|
-10
|
|||
| Nondurable goods |
-9
|
-9
|
-6
|
6
|
-6
|
|||
| Service-providing |
144
|
180
|
179
|
154
|
137
|
|||
| Retail Trade |
16
|
19
|
-3
|
26
|
36
|
|||
| Financial activitiesa |
8
|
14
|
16
|
7
|
0
|
|||
| PBSb |
38
|
57
|
42
|
22
|
-7
|
|||
| Temporary help services |
11
|
18
|
-1
|
-3
|
-1
|
|||
| Education and health services |
33
|
36
|
41
|
37
|
54
|
|||
| Leisure and Hospitality |
25
|
23
|
38
|
28
|
21
|
|||
| Government |
14
|
14
|
20
|
30
|
23
|
|||
| Average for period (percent) | ||||||||
| Civilian unemployment rate |
5.5
|
5.1
|
4.6
|
4.6
|
4.4
|
|||
a.Financial activities include the finance, insurance, and real estate sector and the rental and leasing sector.
b. PBS is professional business services (professional, scientific, and technical services, management of companies and enterprises, administrative and support, and waste management and remediation services.
Source: U.S. Department of Labor, Bureau of Labor Statistics.
The job gains in the March employment report were abnormal because of the contributions of particular industries and the magnitude of those changes. For example, March’s gain in construction was the largest since January of last year, and much higher than the average gain of 11,000 jobs in 2006. Also, March’s loss in professional business services was well below the 2006 average monthly growth of 42,000.
The March employment report seemed to be a reaction to February’s weak report—initially a 97,000 increase—which many economists attributed to unusually bad weather in North America. Construction, a sector that is sensitive to seasonal changes, fell in February, and rebounded firmly in March. Indeed, the percent of nonfarm employees who were not at work due to weather was elevated in February (11 percent) compared to the same month in prior years.
“Vacation” and “own illness” were the most popular reasons for not working (28.1 percent and 24.8 percent, respectively), while weather-related reasons accounted for 11 percent of absences in February. However, while the first two reasons were in line with their historical averages for February, weather was nearly four percentage points above its historical average. Therefore, the supposed weakness in February is probably weather-related, and the subsequent market correction appeared in the March employment report.
