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The Employment Situation, March

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.

Average Nonfarm Employment Change

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.

Private Sector Employment Growth

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
Durable goods -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.

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