The Importance of March 2010 US Jobs Growth
Job growth in March was solid, but improved sentiment could be a bigger positive than the number itself, say Morningstar's Bob Johnson and Vishnu Lekraj.
The Importance of March 2010 US Jobs Growth Jason Stipp: I'm Jason Stipp for Morningstar. Finally at long last we see some job growth in the market with the government releasing its unemployment report for March. It showed 162,000 jobs were gained last month and the unemployment rate held steady at about 9.7%. Here with me to dig into the report is Morningstar's Bob Johnson. He's calling in. We also have in the studio Vishnu Lekraj. He's an equity analyst covering the employment sector. Thanks for being here again, guys. Vishnu Lekraj: Thank you. Bob Johnson: Nice to be here. Jason Stipp: So first question Vishnu the jobs report, was it a Good Friday or a great Friday? Vishnu Lekraj: A Good Friday. It lived up to its name. We had 162,000 jobs added to the economy, came in with a consensus. Now, as the viewers would know, I like to be cautious with the number and the reports. But I really like this report a lot for the very fact that not only its positive -- and you can't take one month's number and extrapolate out as a trend -- but it's a good sign. Things are ticking up, almost all categories are up. Information services, financial services were the downers this month, which makes a little bit of sense. But all in all, I think it's a really good report. Jason Stipp: Sure. Bob, how good was this jobs report? Bob Johnson: Well, I think it was just a little better than what I was thinking and it was just a little bit below consensus, but the good news is they revised the last month's number so we didn't lose quite as many jobs last month. So we're kind of back where the consensus was so that feels pretty good. I think the Census workers were at about 40-some thousand and I think that as an addition and some people will view that as kind of a one-time special thing, and I think that number as a proportion of the jobs is in pretty good shape. So overall, I thought the report was a good one. Jason Stipp: Good. Now Vishnu, you dug into some of the numbers, looking underneath and looking at some of the sectors and industries, and had some interesting findings there. What do you think is the big takeaway of some of that data that's underlying the headline number? Vishnu Lekraj: The biggest takeaway is maybe discretionary consumer spending is coming back. You see a lot of restaurants, spirits establishments, hiring. Leisure/hospitality added jobs. Also, you had the retailers, the Home Depot, the Lowe's, the garden and supply guys starting to hire. So when you take all of that into consideration, businesses may be feeling a lot better about consumer spending, which is a great sign for the economy. Jason Stipp: Certainly if those businesses, considered very discretionary, if they're thinking that things are looking up, it's certainly a good sign for the economy overall. Vishnu Lekraj: Definitely. Bob Johnson: And I would add that the one besides all the nice discretionary things you see on the consumer side, on the business side this was the first month in a long, long time since we began the recovery that we've actually added jobs in the goods producing sector. When you put manufacturing, construction and mining all together, we actually had a gain this time around. So manufacturing has been a little better every month this year and now the whole category is up. I always like that because those are rather well-paying jobs and I think they kind of really get the economy going a little bit. Jason Stipp: Sure. Now Bob, a couple of the data points that you look at underneath the headline number and you mentioned in our report preceding this was average workweek and wages. What did the data tell us on those fronts? Bob Johnson: The workweek was up, which was good to see. It recovered a little bit of what it lost last month when the snowstorms kept people away from the factories at least a day or so here and there. So it's good to see that number back up. The wage number I need to do a little bit more work on, but it was down just a touch this month. I think it's probably because, as Vishnu mentioned, some of the lower-paying jobs, some of the retailers, some of the hospitality, which tends to be on the lower end of the scale, had some of the bigger growths. So I'm thinking that's at least part of the explanation. I would rather see that number up than down, but it certainly wasn't a disaster. Jason Stipp: Okay. And Vishnu, you also did a little bit of the digging into the ages and how the ages are becoming employed again and had an interesting point there. What did you find there? Vishnu Lekraj: Well, when you break it down by age category, you look at the 25- year-old to 34-year-old age category, and that category ticked up in terms of unemployment rates. Now that may be a bad thing on the surface, but when you dig down, when you think about it, that category of workers have the ability to leave the job force very easily. They can go back and live with mom or they can go and live with a roommate, and they can leave the job force. But now, it seems that they're re-entering the job force, looking for work, so their unemployment rate is going up for that age category, but that's not a bad thing. It's a good thing. Jason Stipp: So maybe if they're staying home with mom and dad, they might have a little bit of extra discretionary income. Vishnu Lekraj: Right, exactly. Jason Stipp: Okay. Bob Johnson: And one of the interesting things that fall out of all that data, too, is the participation rate this month was up again. In other words, more people were looking for work. So you might say, well unemployment was flat, that's not so good, but actually there were a lot more people looking for work this month. People saying, you know I may be going to give this job market a shot. So that was a particularly encouraging number, because it means people are having more confidence again. It's like, well maybe I should try. I think that this whole report, whether the numbers are plus or minus 100 jobs, it really didn't make a lot of difference to an economist counting dollars, because the change is so small. But psychologically to be able to say we've added jobs and that more people are participating in the labor force. I couldn't help but to listen to "Good Morning America" this morning and before the number came out, it's all they talked about for the first five minutes of the news report, and I think that's got to have a positive impact. Jason Stipp: Sure. I think that intangible could be very crucial. Vishnu, what would you say is your biggest takeaway on that point from the jobs report. Vishnu Lekraj: Right. You can be Republican, Democrat, left, right, it doesn't matter as long as the administration can claim that they're creating jobs, pound the table, that gets out in the news cycle, gets out in people's heads, builds more confidence, more people come into the workforce and start spending more, create more jobs, great news. Not only this number was positive, but this is catalyst. It gives people confidence to go back in the workforce and create more jobs. Jason Stipp: Great. Guys, as always it's great to hear your insights on the report. Thanks for joining me this morning. Vishnu Lekraj: Thanks a lot. Bob Johnson: Thank you. Jason Stipp: For Morningstar, I'm Jason Stipp. Thanks for watching.