The March Jobs Numbers Show the Economy Is Sound, but Far From Invincible

The March employment numbers were a disappointment, but only relative to extremely optimistic expectations. The basic story of a robust United States job market remains very much intact — though with an important asterisk.

Sure, the United States added only 103,000 jobs in March, down from the blockbuster 326,000 in February. Yes, the unemployment rate was unchanged rather than declining further as forecasters had expected. Did the size of the labor force shrink by 158,000, partly reversing a sharp February rise? You bet it did.

But the weak job creation number surely reflects some reversion to the mean after that extraordinary February number. The United States has added an average of 202,000 jobs a month in the first three months of 2018, which probably reflects the true underlying trend better than either February or March in isolation.

Weather may be a factor — a mild February may have goosed that month’s numbers while a more dismal (or even just normal) March depressed the most recent reading.

The unemployment rate may not have fallen further, but 4.1 percent is a comfortably low level, and it may well be that future improvement in the job market will show up in the form of a rising labor force rather than shrinking unemployment. One plausible path for the job market would be for the jobless rate to stay roughly where it is while people who previously weren’t even looking for a job decide to seek work — and find it quickly.

And speaking of the labor force, the good news is that most of the extraordinary improvement in February was maintained. There was a gain of 806,000 Americans either working or looking for work in February; the March number gave back less than one-fifth of that.

Relatedly, the ratio of the adult population that was employed soared from 60.1 percent in January to 60.4 percent in February, then held that level in March.

So taken together, these numbers are fully consistent with the view that the United States labor market — and economy as a whole — are in sound shape, expanding steadily and putting more people to work despite an expansion nearing its nine-year anniversary.

With average hourly earnings rising only 2.7 percent over the last year, there is not much evidence of the kind of inflationary pressure that might make the Federal Reserve more inclined to tap on the brakes. There is nothing in the March job numbers that is likely to make the Fed rethink its direction one way or the other.

Which brings us to the asterisk.

This report wasn’t as bad as the headline numbers might suggest, but it does take a bit of the shine off the idea that the economy in 2018 is in some period of extraordinary growth. The soft numbers are evidence that the United States is not in some radically different economic position than it has been for the last several years.

Rather, there has been gradual improvement underway for many years that continues apace.

In a few weeks, the Commerce Department will release its first estimate of first-quarter growth in gross domestic product, and analysts are expecting it to be nothing special. Macroeconomic Advisers’ most recent tracking estimate was 1.5 percent growth; the Federal Reserve Bank of Atlanta’s “GDPNow” forecasting model has it at 2.3 percent. Either of those numbers would look more like the expansion Americans have grown to know these last nine years than some new economic world.

If job numbers like February’s had become the norm, it would have had major political implications, in making the tax law passed at the end of 2017 look like an economic boon and suggesting the United States economy was in a boom that could enable it to weather whatever damage a trade war might incur.

The March numbers are a reminder that while the economy is sound, this is hardly some unprecedented run of economic greatness. If nothing else, the new numbers are a reminder that no one involved in America’s trade diplomacy should negotiate with a belief in the nation’s economic invincibility.