April 2018 National Economic Outlook

Payroll Job Growth Was Soft in March, But With a Big Drop in the Unemployment Rate  

Executive Summary

Payroll employment rose by just 98,000 in March, well below the market consensus of 180,000. March private-sector employment growth was 89,000, far below the ADP figure of 263,000. There was a downward revision to job growth in February to 219,000 (from 238,000) and in January to 216,000 (from 238,000), for a net downward revision of 38,000.

  • Construction job growth slowed to 6,000 in March, after gains of 59,000 in February and 34,000 in January; warmer-than-usual winter weather pushed building projects earlier into the year, and so this year’s spring pickup in hiring is smaller than in past years.
  • One-time factors—the slowing in construction hiring, the mid-March snowstorm on the East Coast, a late Easter, and big store closings—explain much of the weakness. But despite the soft March number, job growth in the first quarter averaged 178,000 per month, close to last year’s monthly average of 187,000.
  • Average hourly earnings were up 2.7 percent in March from one year earlier, down from 2.8 percent growth in February, but up from sub-2 percent growth a few years ago, as the tighter job market is pushing wages higher.

The unemployment rate fell to 4.5 percent in March from 4.7 percent in February; this was the lowest unemployment rate since May 2007. The number of people who reported having jobs in the household survey (different from the survey of employers) rose by a large 472,000 in March, after a big 447,000 increase in February.

The labor force participation rate held steady at 63.0 percent, well below its pre-recession level. The broader U-6 unemployment rate (unemployed, underemployed and too discouraged to look for a job) fell to 8.9 percent in March from 9.2 percent in February and 9.4 percent in January, and is at its lowest since the beginning of 2008.

Retail sales fell 0.2 percent in March, with growth in February revised lower. Motor vehicle and parts sales fell 1.2 percent over the month, as unit auto sales dropped, and gasoline sales fell 1.0 percent with lower gas prices. Core sales, excluding autos and gasoline, were up a scant 0.1 percent.

A late Easter likely restrained spending growth in March as well. Sales fell over the month for furniture and home furnishings, building materials, sporting goods and hobby supplies, and restaurants. Sales were higher in March for electronics and appliances, clothing and accessories, and for nonstore retailers.

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April National Economic Outlook

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