TOPICS > Economy

80,000 Jobs Lost in March As Economy Continues To Slow

April 4, 2008 at 6:10 PM EDT
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The economy continued its slump in March, sloughing off 80,000 jobs. An economic consultant assesses the latest set of job numbers and what it indicates about the health of the U.S. economy.
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RAY SUAREZ: Today’s news that 80,000 jobs were lost in March provided yet more evidence that economic conditions continue to weaken. So far this year, employers have shed some 232,000 jobs, with some of the biggest losses coming in construction, manufacturing and financial services. We get some perspective now from Nick Perna, managing director of Perna Associates, an economic analysis consulting firm. He is also a lecturer at the Haas School of Business at the University of California, Berkeley. If you are trying to assess the health of the economy overall, what does this latest set of numbers tell you?

NICK PERNA, managing director, Perna Associates: Ray, it tells you that the — that we are in a recession. There’s almost no doubt about it at this point.

RAY SUAREZ: You know, economists always caution against taking one month’s numbers and trying to read too much into that. But what do three straight months of decline tell you about what is going on in the wider economy?

NICK PERNA: Well, think that they are pretty convincing evidence, Ray, that we are in a decline, that the economy peaked somewhere around December of last year. And we’re seeing more and more things that point to recession. For example, just the other day, we got a labor market indicator called initial claims for unemployment insurance. And that went above 400,000 people for the first time in a while. And that’s usually also associated with recession. So, it is not just these three months, which in and of themselves are pretty compelling evidence, but it is other stuff as well.

Assessing indicators of a recession

RAY SUAREZ: Now, not to minimize any one family's losses, because obviously, if you are out of work, it is pretty devastating, but is 232,000 a significant number inside an economy with, what, 115 million jobs?

NICK PERNA: It's actually more like, I think, 130 million. Yes, it's relatively small, but, if you are affected by it, it's a big deal. However, let me try to put it in a slightly different perspective. I looked back at the last two recessions in the United States. There was one back in 2001. And there was one back in 1990-91. And the first three months of job decline back in those recessions, the declines were considerably larger than we have had the first three months this go-around. They were about a third larger. So, what this is as to me is that, while these numbers are large, the wheels aren't falling off the economy in that sense.

RAY SUAREZ: So, it's plausible the forecasts that we have heard in recent weeks saying that, if there is a recession, that it might not be too deep or too long-lived?

NICK PERNA: That's quite the possibility. At least the data that we have got in our hands right now, with the three months worth of job losses, would be consistent with that. You know, I think it would take a lot of things to make it happen. For example, we would need to see stabilization in housing markets and elsewhere, but looking at these numbers alone, and looking back at those last two recessions, which were relatively mild compared to the other ones we had in the post-World War II period.

RAY SUAREZ: Also in the new Bureau of Labor statistics numbers, an indication that workers who have kept their jobs aren't getting much of raises either.

NICK PERNA: Yes, I mean, that's one of those good news/bad news things. I think average hourly earnings were up something like 3.6 percent shown in this same survey over the last 12 months. And, unfortunately, the cost of living, as measured by the consumer price index, is up more like 4. So, you know, it's not just a proverbial treadmill. It's people actually losing some ground. That's the bad news. The good news is, we don't need another sign of inflation right now to spook financial markets, foreign exchange markets. So, the comfort in that number is that there is not a lot of inflation concern arising from wages at this moment.

Not all industries affected

RAY SUAREZ: Are there job categories, are there industries, are there sectors of the labor force that are doing well, despite the overall bad news?

NICK PERNA: Well, actually, a couple of them. First of all, I'm proud to report that employment at the Federal Reserve was stable. There is actually a category for central banks in the Labor Department's report. But, more seriously, there was an increase in employment in health care. There was an increase in food service employment. So, I guess we're not going out as much, but we're eating a little bit more. And then, thirdly, there was an increase in government employment. So, these were not big enough to offset what happened elsewhere, particularly to construction and manufacturing, but they -- you know, not everything is declining at the same time.

RAY SUAREZ: Along with the announcement that 80,000 jobs were lost in the past month came revisions to earlier months' employment numbers. How does that happen? How does the Bureau of Labor Statistics count a job in December or January that turns out to not have existed by the time you get to March or April?

NICK PERNA: That's a really disconcerting or disturbing feature of the data. And what it is, is that they don't get complete reports from all the respondents to the survey. So, as they come in, then they are able to fill out the survey, as it were. It would seem to me that one area where we could actually spend some government money productively is shortening the lags between reports from employers and what the Labor Department reports out, because these numbers have a big impact on decisions by the Federal Reserve, reactions by the financial markets, and even how people on the street feel about the economy.

Weighing the Fed's response

RAY SUAREZ: Well, you mentioned the Federal Reserve. It's been pretty busy in recent weeks. Is there a line that you can draw, a set of moving parts inside the economy, that gets you from what the Fed has been doing to whether people get employed or hired or not?

NICK PERNA: Well, I think the thing that we want to keep in mind is that most of the actions by the Fed, in terms of interest rates, take a while to have their impact. Typically, it could be upwards of a year before you feel the full impact of a cut in interest rates. So, the Fed started cutting interest rates last August. And, so, help is on the way, and there's help in the pipeline already. And then, secondly, we have got the stimulus package. Many people are going to get sizable rebate checks in the mail very, very soon. So, I think that will put an end to this. And I think both the stimulus package and the Fed's quick response are way ahead of where we were in past recessions, in terms of trying to deal with the problem.

RAY SUAREZ: Nick Perna, thanks for joining us.

NICK PERNA: My pleasure.