Don't freak out over March's lousy jobs report

The March jobs report released by the federal government on Friday was terrible ... right?

America's economy added a meager 98,000 jobs last month, barely half of the 185,000 new jobs economists expected. The Labor Department's report also cut February's job gains from 235,000 down to 219,000, and January's from 238,000 to 216,000. It all seems very bad.

Well, don't worry. The March jobs report is probably just a one-time aberration.

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Month-to-month job creation numbers bounce around all the time. For several years running, we've had at least two months get this low, or nearly this low, every single year. And even after some disappointing downward revisions, January and February still saw lots of job growth. We'll likely bounce back to that level of growth in the next report.

And there's more reason for optimism: Beyond the actual number of jobs gained, every other signal in Friday's report suggests an economy that's still on a steady upward climb. The unemployment rate fell from 4.7 percent to 4.5 percent. Just as important, participation in the labor force held steady at 63 percent. That means the decrease in unemployment was mostly due to people actually finding work, as opposed to giving up and dropping out of the labor force entirely.

The percentage of Americans between ages 25 and 54 who have a job — another key metric of the economy's health — is still ticking upward. The growth rate for average wages is still steadily rising too, and is now at 2.7 percent — almost the highest it's been since the Great Recession.

Finally, we also have a very likely culprit for why March's number was so low: the weather.

Each month, the Bureau of Labor Statistics produces the jobs report by spending a week surveying tens of thousands of American households about their employment situation. Certain sectors of the economy — like construction, hospitality, leisure, and retail — are particularly sensitive to the weather. Construction, of course, occurs outside, so there's not as much point in hiring for an immediate job when there's sustained bad weather. As for hospitality, retail, and leisure: No one wants to travel or shop if it's gross out, and businesses adjust their immediate hiring accordingly. So if it's super cold or there's bad rain or a snow storm in the week when BLS gathers its data, that can depress demand in those sectors and put a big dent in the final number.

Sure enough, the big weakness in March's job numbers was in those sectors. Over January and February, the combined jobs in those industries increased by an average of 70,000 — then fell by 15,000 in March.

"Winter Storm Stella impacted the Midwest and East Coast early in the payroll survey week" according to economists at Goldman Sachs. "Much of the snow that accumulated during the storm did not melt until Thursday or Friday." For that reason, the analysts were anticipating a sharp drop in the March numbers even before the jobs report came out. (Though they still anticipated the jobs number would be a good deal higher than it was.)

In fact, we saw the inverse of this effect in February, which was unseasonably warm — the hottest February we've seen since 1954, according to the National Oceanic and Atmospheric Administration, and the second hottest since recordkeeping began way in 1895. MarketWatch reported that the number of Americans telling surveys they couldn't work because of bad weather usually averages 314,000 in February. But this February, it was only 157,000. An economist at Morgan Stanley figured that, all told, February's job creation number would likely have been only around 200,000 if not for the warmth.

Now, none of this means the economy is hunky dory, of course.

The hole left by the Great Recession is still very large. We really should be averaging 246,000 new jobs per month to close it in a reasonable time frame, and we're not.

Labor force participation is still unusually depressed. The employment rate for the 25-to-54 crowd is still below the peak it hit before the 2008 crisis — which was below the peak it hit just before the 2001 downturn. And the sweet spot for the wage growth rate is 4 percent — that's what we tend to get when the supply of job openings finally starts pulling even with the supply of people looking for work. We're still well below that target.

But for the moment, don't panic: It's already April, and the sun is coming.