192K New Jobs In March, Unemployment Rate Unchanged At 6.7%

by: Doug Short

Here are the lead paragraphs from the Employment Situation Summary released this morning by the Bureau of Labor Statistics:

Total non-farm payroll employment rose by 192,000 in March, and the unemployment rate was unchanged at 6.7 percent, the U.S. Bureau of Labor Statistics reported today. Employment grew in professional and business services, in healthcare, and in mining and logging.

In March, the number of unemployed persons was essentially unchanged at 10.5 million, and the unemployment rate held at 6.7 percent. Both measures have shown little movement since December 2013. Over the year, the number of unemployed persons and the unemployment rate were down by 1.2 million and 0.8 percentage point, respectively.

Today's report of 192K new non-farm jobs was lower than the Investing.com forecast of 200K. And the unemployment rate, unchanged at 6.7% is a tick above the Investing.com expectation of 6.6%.

The unemployment peak for the current cycle was 10.0% in October 2009. The chart here shows the pattern of unemployment, recessions and both the nominal and real (inflation-adjusted) price of the S&P Composite since 1948.

Unemployment is usually a lagging indicator that moves inversely with equity prices (top chart). Note the increasing peaks in unemployment in 1971, 1975 and 1982. The inverse pattern becomes clearer when viewed against real (inflation-adjusted) S&P Composite, with its successively lower bear market bottoms. The mirror relationship seems to be repeating itself with the most recent and previous bear markets.

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The second chart shows the unemployment rate for the civilian population unemployed 27 weeks and over. This rate has fallen significantly since its 4.4% all-time peak in April 2010. It dropped below 3% in April of last year, and last month's 2.4% is fractionally off the interim low of 2.3% in January.

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The next chart is an overlay of the unemployment rate and the employment-population ratio. This is the ratio of the number of employed people to the total civilian population age 16 and over.

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The inverse correlation between the two series is obvious. We can also see the accelerating growth of women in the workforce and two-income households in the early 1980s. Following the end of the last recession, the employment population has three times bounced at 58.2% - a level that harkens back to the 58.1% ratio of March 1953, when Eisenhower was president of a country of one-income households, the Korean War was still underway and rumors were circulating that soft drinks would soon be sold in cans.

The latest ratio of 58.9% is at the top of a narrow range since the end of the last recession and the highest reading since August 2009.

For a confirming view of the secular change the US is experiencing on the employment front, the next chart illustrates the labor force participation rate. To two decimal places we're at 63.18%, fractionally off the interim low of 62.76% set in October of last year. Today's level was first seen in the Spring of 1978.

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The employment-population ratio and participation rate will be interesting to watch going forward. The first wave of Boomers will continue to be a downward force on this ratio. The oldest of them were eligible for early retirement when the Great Recession began, and the Boomer transition to the retirement will accelerate over the next several years.

What is the average length of unemployment? As the next chart illustrates, we are perhaps seeing a paradigm shift - the result of global outsourcing and efficiencies of technology. The post-recession duration of unemployment has remained disturbingly high at 35.6 weeks, although that's off the 40.7-week all-time high in late 2011.

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The last chart is one of my favorites from Bill McBride at Calculated Risk. It shows the job losses from the peak employment month since World War II. Note the addition of the dotted-line alternative for the current cycle, which shows unemployment excluding the temporary census hiring.

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The start date of 1948 was determined by the earliest monthly unemployment figures collected by the Bureau of Labor Statistics. The best source for the historic data is the Federal Reserve Bank of St. Louis.