Meet the Author

Murat Tasci |

Research Economist

Murat Tasci

Murat Tasci is a research economist in the Research Department of the Federal Reserve Bank of Cleveland. He is primarily interested in macroeconomics and labor economics. His current work focuses on business cycles and labor markets, labor market policies, and search frictions.

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Meet the Author

Beth Mowry |

Research Assistant

Beth Mowry

Beth Mowry was formerly a research assistant in the Research Department of the Federal Reserve Bank of Cleveland. Her work focuses on labor markets and business cycles.

04.07.08

Econonmic Trends

The Employment Situation

Murat Tasci and Beth Mowry

Total nonfarm payroll employment declined by 80,000 in March to 137,846, according to the initial estimate released by the Bureau of Labor Statistics (BLS) today. The BLS also published its revisions for January and February 2008. The revisions suggest that payroll employment declined more in each month than initially reported; in January, 22,000 more job losses were added to the original estimate, bringing the month’s total to 76,000, and in February 63,000 more job losses were added, bringing the month’s total also to 76,000. Overall these numbers indicate a quarterly decline in payroll employment of 232,000 (an average of 77,000 each month), the lowest employment growth since the first quarter of 2003.

Job losses in March were quite broad-based, affecting most goods-producing industries as well as several service-providing industries. The construction sector lost the most jobs in March with 51,000, followed by manufacturing with 48,000. Most of the decline in construction employment was in residential construction (–31,000), another manifestation of housing market troubles. Nonresidential construction employment also experienced a decline of 15,400 jobs in March. The manufacturing sector lost around 48,000 jobs, with 35,000 of them in durable goods manufacturing and the rest in nondurable goods production. This was the twenty-first straight month of employment decline in the manufacturing sector, indicating that a declining trend in manufacturing employment was exacerbated by recent business-cycle factors.

 

Labor Market Conditions

 
Average monthly change (thousands of employees, NAICS)

2005

2006

2007

YTD 2008

March 2008

Payroll employment

211

175

91

−77

−80

  Goods-producing

32

3

−38

−81

−93

    Construction

35

13

−19

−42

−51

    Heavy and civil engineering

4

3

−1

−7

−5.1

      Residentiala

11

−2

−10

−30

−31

      Nonresidentialb

4

7

1

−5

−15.4

    Manufacturing

−7

−14

−22

−46

−48

      Durable goods

2

−4

−16

−29

−35

      Nondurable goods

−8

−10

−6

−14

−13

  Service-providing

179

172

130

4

13

    Retail trade

19

5

6

−25

−12.4

    Financial activitiesc

14

9

−9

−8

−5

      PBSd

56

46

26

−32

−35

    Temporary help services

17

1

−7

−20

−21.6

    Education and health svcs.

36

39

44

44

42

    Leisure and hospitality

23

32

29

16

18

    Government

14

16

21

18

18

      Local educational services

6

6

5

6

6.1

       

Average for period (percent)

Civilian unemployment rate

5.1

4.6

4.6

4.9

5.1

a. Includes construction of residential buildings and residential specialty trade contractors.
b. Includes construction of nonresidential buildings and nonresidential specialty trade contractors.
c. Includes the finance, insurance, and real estate sector and the rental and leasing sector.
d. 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: Bureau of Labor Statistics.

 

Perhaps the most important reason for the significant employment decline in the first quarter was the relatively low performance of the service sector. Services added only 13,000 jobs this month, due mostly to education and health services, which in the previous month had contributed more than 40,000 jobs. Service industries managed to add a mere 12,000 jobs in the first quarter, which is the worst performance for the sector since the first quarter of 2003. Professional and business services, which has led employment growth for some time, reported a decline of 35,000. If we compare service-sector employment figures for March and the first quarter of 2008 with those of the past three years, we see that several service industries—education and health services, leisure and hospitality, and government—have continued to create jobs, while professional and business services and retail trade have started to report major declines.

The three-month moving average of private sector employment growth shows a definite declining trend over the past year, and even more broadly over the past three months. Currently, the three-month moving average of private sector employment growth stands at -95,000, its lowest value since April 2003.

The BLS also reported that the unemployment rate rose 0.3 percentage point in March to 5.1 percent, from 4.8 percent in February. Most of this increase was accounted for by an increase in the labor force (410,000) and not by a significant decline in employment numbers (-24,000).

Labor Market Conditions and Revisions

 
Average monthly change (thousands of employees, NAICS)

Jan
current

Revision
to Jan

Feb
current

Revision
to Feb

Mar
2008

Payroll employment      

−76

−54

−76

−13

−80

  Goods-producing    

−69

−15

−82

7

−93

    Construction  

−39

−14

−37

2

−51

      Heavy and civil engineering

−9.2

−4

−7

−2

−5

      Residentiala

−35

−5

−25

1

−31

      Nonresidentialb

5.2

−5

−4

4

−15

    Manufacturing  

−35

−4

−46

6

−48

      Durablegoods

−21

−2

−30

10

−35

      Nondurable goods

−14

−2

−16

−4

−13

  Service-providing    

−7

−39

6

−20

13

    Retail trade  

−16

−15

−47

−13

−12

    Financial activitiesc  

−8

0

−11

1

−5

      PBSd

−30

−21

−30

−10

−35

      Temporary help services

−4

7

−34

−6

−22

      Education and health services

49

0

40

10

42

      Leisure and hospitality

9

−2

20

−1

18

    Government  

3

−1

33

−5

18

      Local educational services

2

1

10

−1

6

a. Includes construction of residential buildings and residential specialty trade contractors.
b. Includes construction of nonresidential buildings and nonresidential specialty trade contractors.
c. Includes the finance, insurance, and real estate sector and the rental and leasing sector.
d. 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: Bureau of Labor Statistics.

These numbers all point to a weak labor market in March, with many sectors losing jobs relative to the previous month. The job loss reported in March combined with the downward revisions for January and February indicate that the labor market might have started to experience a downward cyclical turn in the first quarter of 2008. This is consistent with the observed downward trend in job openings we started to experience starting at the end of 2007 and which we discussed in an earlier Trends article. Payroll numbers for February and March are subject to revision in the next report.