WASHINGTON — Employers hired fewer workers than forecast in March and a slump in the size of the labor force pushed the jobless rate down to a four-year low, indicating the U.S. job market is struggling to make bigger strides.
Payrolls grew by 88,000 workers, the smallest gain in nine months and less than the most-pessimistic forecast in a Bloomberg survey, after a revised 268,000 February increase, Labor Department data showed today in Washington. The median forecast of 87 economists called for a 190,000 gain. The jobless rate fell to 7.6 percent from 7.7 percent.
Stocks and bond yields tumbled as the report raised concern that the world’s largest economy may be weakening just as federal budget cuts take hold. The absence of sustained and bigger gains in employment and earnings underscores the Federal Reserve’s view that more progress is needed before record monetary policy stimulus can be scaled back.
“We’ve hit a wall when it comes to the job situation,” said Nariman Behravesh, chief economist at IHS Inc. in Lexington, Massachusetts. “The U.S. labor market had been doing very well, but it’s going back into a soft patch. One worry is that this is an early warning of the impact of the sequester, and businesses may be anticipating its full impact. It’s not going to last forever, but we could see a few months of weak job numbers.”
The unemployment rate, derived from a separate survey of households, was forecast to hold at 7.7 percent, according to the Bloomberg survey median. The figure, the lowest since December 2008, reflected a 496,000 decline in the size of the labor force.
The labor force participation rate fell to 63.3 percent, the lowest since May 1979.
The Standard & Poor’s 500 Index declined 1 percent to 1,543.89 at 9:49 a.m. in New York. The yield on the benchmark 10-year Treasury note fell to 1.70 percent from 1.76 percent late yesterday.
The difference between today’s outcome and the average estimate of economists surveyed by Bloomberg was 3.5 times larger than the poll’s standard deviation, or the average divergence between what each economist forecast and the mean. The U.S. dollar dropped 0.5 percent against the euro five minutes after the report was released.
Some companies are struggling to make do with fewer workers. At Wal-Mart Stores Inc., merchandise is piling up in aisles and in the back of stores because the company doesn’t have enough employees to keep shelves stocked, according to interviews with workers.
In the past five years, the world’s largest retailer added 455 U.S. Wal-Mart stores, a 13 percent increase, according to filings and the company’s website. In the same period, its total U.S. workforce, which includes Sam’s Club employees, dropped by about 20,000, or 1.4 percent. Wal-Mart, based in Bentonville, Arkansas, employs about 1.4 million U.S. workers.
Retail payrolls and factory employment slumped the most since February 2012, today’s report showed.
“The big weakness in March was retail, and this was the coldest month of March we’ve had in over a decade,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. Price is the top payrolls forecaster of the past two years, according to data compiled by Bloomberg.
Howie Appel knows doubly how tough it is to find work. The 65-year-old lost his position as a corporate recruiter at HNTB Corp. in Lake Mary, Florida, in 2009. He has worked several part-time jobs since then, he said.
One of his roles is helping others find jobs as executive director of ProNet Career Resources, an unemployment and under- employment support group he founded in 2003. Many of its members are baby boomers struggling to find opportunities as they compete with recent college graduates.
“It’s a very, very slow comeback,” he said. “We’re hearing all over the place that there are openings. We’re hearing it but not seeing it.”
Even as job growth slowed, employers boosted hours to meet demand, today’s report showed. The average work week for all employees increased by six minutes to 34.6 hours, the highest since February 2012. At the same time, average hourly earnings for all workers were stagnant in March.
Payroll projections ranged from gains of 100,000 to 366,000 following an initially reported 236,000 increase in February, according to the Bloomberg survey. Revisions to the prior two months’ reports added a total of 61,000 jobs to the employment count in January and February.
Private payrolls, which don’t include jobs at government agencies, climbed by 95,000 in March after a revised gain of 254,000 the previous month. Economists forecast they would grow 200,000 following an initially reported 246,000 gain in January.
Factory employment dropped by 3,000 workers in March, compared with a projected 10,000 advance and following a 19,000 increase in the previous month.
Employment at private service-providers rose 79,000 last month, today’s report showed. Construction companies added 18,000 workers after a 49,000 surge in February that was the biggest in almost six years.
Government payrolls decreased by 7,000 last month after a 14,000 increase. Federal and local government employment declined.
The job market kept making limited progress just as $85 billion in automatic across-the-board government budget cuts, known as sequestration, started March 1, threatening to slow the U.S. economy. The reductions in planned spending, which began because Congress couldn’t compromise on a debt-reduction strategy, trim 5 percent from domestic agencies and 8 percent for the Defense Department this fiscal year.
Even so, consumer and corporate demand has given companies reason to keep expanding. Americans have coped with a two percentage-point increase in payroll taxes and a jump in gasoline prices earlier this year. In February, household purchases climbed the most in five months.
Businesses like Winnebago Industries Inc. have had to add more workers as output increased. The Forest City, Iowa-based maker of motor homes boosted daily production 24 percent during its fiscal second quarter compared with the prior three months, partly by adding staff, according to Chief Financial Officer Sarah Nielsen.
“The lines are completely filled and running, and we’ve been hiring,” Nielsen said during a March 28 earnings call. “Our headcount at this juncture is a little bit under where we need to, but we’ve been keeping up for the most part.” The company has been adding about 20 people a week on a consistent basis, she said.
Additionally, a healthier real-estate market has created the need for more construction jobs since the middle of 2012.
The Pollack Shores Real Estate Group, an Atlanta-based apartment developer and property manager, has boosted employment to 120 this week from 93 at the end of 2012. The company plans to build about 2,000 apartments this year, twice as many as last year, said President Steven Shores.
“That will create a significant number of construction jobs,” which are contracted out and not on the company’s staff directly, he said. “There is a big demand for construction jobs. We are starting to see a lack of labor supply drive up some pricing in our areas.”
“The economy is continuing to get better and the job market is going to get tremendously better,” he said.
Fed officials are waiting for sustained signs of job-market resilience before winding down their $85 billion of monthly bond purchases. Central bank policy makers reiterated in a March 20 statement that they would continue to buy securities until the labor market outlook improves “substantially.” Each month the Fed is purchasing Treasuries and mortgage bonds to keep interest rates low, spur economic growth and reduce unemployment.