U.S. Employment Down Sharply During March

The Labor Department's report on March employment trends badly damaged the confidence of those who believe that the U.S. can still escape a mild recession this year. Even with all of the bad news in manufacturing markets, business investment spending, and exports, the U.S. could always point to the fact that it continued to generate a healthy number of new jobs each month and that the unemployment rate showed little sign of moving higher. No longer.

Although total non-farm jobs had declined during both July and August of last year, that could be attributed entirely to the hundreds of thousands of temporary Census Bureau employees that were being laid off as the decennial census effort winded down. Without that special circumstance, overall U.S. employment would have risen modestly over those two months. There's no such convenient explanation of the 86,000 jobs lost between February and March of this year, however. The decline has to be attributed to the simple fact that economic conditions weakened markedly during the early months of 2001.

The national average unemployment rate rose to 4.3% this March, up from a low of 3.9% early last fall. Most monthly job losses continue to occur in manufacturing. Factory jobs declined by another 81,000 during March to bring the over-the-year loss for manufacturing to 367,000 employees. Total employment in service businesses increased by a negligible 11,000 jobs over the month, while government shed 4,000 positions and the retail sector cut 46,000.

From any historical perspective, the jobless rate remains very low, so overall conditions in the labor market haven't really deteriorated that much—yet. But the trend (if that's what the March number truly represents) is disconcerting and disturbingly supportive of the pessimists who contend that it's not a matter of if, but when, we see compelling evidence that an economic recession has begun.