The U.S. labor market continued to add new jobs last month, but at a slower rate than economists had been hoping for. The Bureau of Labor Statistics said the economy added 120,000 jobs in March, compared to the 205,000 that many analysts had been expecting, in a sign that the employment gains of recent months could be losing steam. The unemployment rate fell to a three-year low of 8.2%, due to a reduction in the number of Americans seeking work.
Betsey Stevenson, a former Labor Dept. chief economist, called the report “disappointing,” writing in a Twitter message, “The recovery continues, but not at the pace we’d like.”
The lackluster jobs report could strengthen calls for another round of stimulus by the Federal Reserve to boost the economy.
“Overall, the report had an undeniably weak tone and will raise doubts about the strength of the labor market,” Michael Gapen, an economist at Barclay’s Capital Research, wrote in a note to clients. “In terms of policy, we do not believe this number alone is sufficient to propel the Fed into action at the April FOMC meeting (April 24-25). That said, the soft employment numbers certainly leave the door open for further accommodation and may shift the decision point to the June FOMC as the Fed continues to monitor the incoming data.”
On the bright side, the economy has added 858,000 jobs over the last four months, the best showing in two years.
Still, the lower-than-expected jobs report could undermine President Obama’s campaign narrative of a strengthening economy. Some 12.7 million Americans remain remain unemployed. Republicans were quick to pounce. “This is a weak and very troubling jobs report that shows the employment market remains stagnant,” GOP presidential candidate Mitt Romney said in a statement.
Friday’s disappointing employment report will become fodder for on ongoing debate over Fed policy. Last week, Fed Chairman Ben Bernanke said in a speech that faster growth is needed to maintain job market momentum, fueling hopes that the Fed might start another round of bond purchases to help spur the economy.
“Further significant improvements in the unemployment rate will likely require a more rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies,” Bernanke said in a speech to the National Association for Business Economics.
But on Tuesday, the central bank released minutes from its last meeting suggesting that as the economy improves, policy-makers are cooling to third round of monetary stimulus, or quantitative easing (QE3). And yesterday, Federal Reserve Bank of St. Louis President James Bullard said the government should take a “wait-and-see approach” on further action.
“The ultra-easy policy has been appropriate until now, but it will not always be appropriate,” Bullard said, adding that the unemployment rate could drop below 8% by the end of the year. “As the U.S. economy continues to rebound and repair, additional policy actions may create an over-commitment to ultra-easy monetary policy.”
The lackluster jobs report could further fuel calls for another round of Fed stimulus.
Friday’s jobs numbers followed encouraging data released earlier in the week. On Thursday, payroll services firm ADP on Thursday estimated that 209,000 jobs were created last month, and the Labor Dept. said that initial claims for state unemployment benefits fell to a seasonally adjusted 357,000, the lowest level since April 2008.