Weaker U.S. Jobs Report Prompts More Questions Over Size of Labor Force

JUDY WOODRUFF: U.S. employers added jobs in March, but not as many as they have in recent months. The Labor Department report raised questions about the strength of the economic recovery, the number one issue in the presidential campaign.


JUDY WOODRUFF: President Obama was quick today to put the best face on the weaker-than-expected jobs report.

PRESIDENT BARACK OBAMA: We welcome today's news that our businesses created another 121,000 jobs last month and the unemployment rate ticked down.

JUDY WOODRUFF: In fact, the increase in jobs was the smallest since October, and well below what was forecast.

The economy had added more than 200,000 new jobs in each of the previous three months. But, in March, the retail sector shed nearly 34,000 positions. And construction companies cut back on hiring. That could be because the mild winter allowed them to do more work in January and February, rather than waiting until spring.

The unemployment rate did fall to 8.2 percent, the lowest since January 2009, as many people stopped searching for work. At a White House forum on women and the economy, the president pointed to recent progress, while conceding he'd like it to come faster.

BARACK OBAMA: Our economy's now created more than four million private sector jobs over the past two years, and more than 600,000 in the past three months alone. But it's clear to every American that there will still be ups and downs along the way, and that we have got a lot more work to do.

JUDY WOODRUFF: But with more than five million people out of work for six months or longer, the man who wants Mr. Obama's job called the report weak and very troubling.

Republican frontrunner Mitt Romney issued a statement saying: "Millions of Americans are paying a high price for President Obama's economic policies. It is increasingly clear the Obama economy is not working, and that, after three years in office, the president's excuses have run out."

Reaction from U.S. financial markets will have to wait until next week. They were closed for the Good Friday holiday.

And for more on the jobs picture, we're joined by Greg Ip of The Economist magazine.

Thank you for being back with us, Greg.

GREG IP, U.S. Economics Editor, The Economist: Pleasure to be here.

JUDY WOODRUFF: So what would you add to flesh out the story of what happened with jobs? And, by the way, we should point out most markets were closed. The stock markets were closed. The bond markets were open. . .

GREG IP: The bond markets were open, and as you may know, bond investors love bad news. And so bond prices were up quite a lot, because the employment news was quite a bit worse than expected.

I think that there is sort of this troubling feeling of deja vu. Both last year and the year before, the year began with very strong job growth, and then by the summertime, it had petered out. Now, it seemed to have been just because of bad luck. We had the problems in Europe. We had high oil prices because of the Libya uprising. And people thought, well, we're past that now.

And the fact that we seem to be going through that cycle again is very troubling. However, there are some reasons I think to expect that this wasn't the sign of an economy that is about to flatline. First of all, 120,000 is not a bad number. It is just bad because we were expecting so much better.

Second of all, we do have some other data about how the economy is doing, such as the weekly number of people looking for unemployment insurance benefits. Those numbers are dropping. We have some survey data from factory managers. Those numbers suggest that things are getting better.

So, I think it is probably the case the economy is still on track. Possibly, what we've seen is a number that is a bit of a payback for employment growth that was stronger than we could sustain for a little while.

JUDY WOODRUFF: So I was reading one analyst today who said, yes, it's disappointing. But he said, when you look under the hood, the numbers are a little bit better. So is that the kind of thing you are talking about then?

GREG IP: A little bit.

So, for example, if you look at it sector by sector, manufacturing was up quite a lot. And since manufacturing has been so hard-hit, it is encouraging to see that that sector continues to make progress.

If you look at the number of hours that people work, they did not go down. Why does that matter? Well, because if firms really thought business was slowing down, they would start cutting back on the hours of their employees. So it is little things like that that suggests this is not a really bad report.

JUDY WOODRUFF: So, again, on the comparisons people have made that you just brought up to last year and the year before, you're saying you see something materially different this year?

GREG IP: I do think it's a little bit better.

Now, there are still risks out there like petroleum, like the possibility of an attack on Iran that drives the price of oil. And Europe still is stumbling through its problems, as Europe tends to do. However, at least so far, gasoline is not up as much in percentage terms as it was a year ago.

And it does look like, although Europe is still in recession, they have sort of eliminated the worst possible scenarios for this year.

JUDY WOODRUFF: Greg, what about the fact the unemployment rate did drop? It was just a tenth of a percent, but is there any significance to that?

GREG IP: Well, there is a little bit of significance.

The unemployment rate has been dropping faster than we can explain for the last five or six months. You know, economists will tell you that the one percentage point drop we have had in that rate in the last four or five month would normally be associated with an economy growing at around a 5 percent rate. And, in fact, at best, we are only growing at around half that rate.

They don't really understand why it's dropping so fast. Part of it is that people are dropping out of the labor force and they're not looking for work. But we don't really know why they are dropping out. They are not actually saying that they are just discouraged. They're just not looking any longer.

Some of them have gone back to school. Some of them have retired. Some of them may have been unemployed so long they have gone on disability and will never work again. And if that's true, then we have lost a big chunk of our labor force, possibly forever. And that is a real tragedy.

JUDY WOODRUFF: And, in fact, I was going to ask you about that, because you look at these people and it's a large percentage of those folks who are out of work. On the horizon for them is what?

GREG IP: It is very hard to tell.

I mean, economists really debate why is it that so many of the unemployed are unemployed for so long? Is it because they just don't have the skills necessary for the jobs that are out there? Is it because they can't sell their houses and move to the cities where there are jobs?

I think probably the best explanation is just that the economy has been so sluggish. And, by the way, we know that that is normal after a financial crisis. And it has been so sluggish that the sales have not been there for businesses to hire a lot. And so the people that they don't hire spend longer unemployed.

JUDY WOODRUFF: Now, there is one other thing I want to — and I should say that we have a report coming up shortly on the program, Paul Solman, who will look at this disconnect between employers looking and people looking for work.

But one of other thing is the Federal Reserve. The Open. . .


JUDY WOODRUFF: The Open Markets Committee, Open. . .

GREG IP: Sure.

JUDY WOODRUFF: What's the name of it?

GREG IP: The Federal Open Market Committee.

JUDY WOODRUFF: The Federal Open Market Committee — thank you — has met.


JUDY WOODRUFF: The feeling seems to be coming out of there that the economy doesn't need stimulus right now.

But with jobs numbers like these, could that change?

GREG IP: If we have a few more months like this, yes, it could change.

I mean, just in the last few days, we got a report on what they talked about at their last meeting three weeks ago. And what surprised the markets was that there was almost no support among the membership of the Federal Open Market Committee for another round of so-called quantitative easing.

This is when the Fed basically prints a lot of money and uses it to buy bonds. And when they buy bonds, they push down long-term interest rates. And that is supposed to stimulate the economy. Why so little support? Well, partly because the numbers had been quite good, as we were just talking about, three or four months of very strong job growth.

That said, Ben Bernanke, the Fed chairman, last week did warn that he thought that the numbers wouldn't stay that good for so long. If the numbers are as weak as they were in March for a sustained period of time, we will start to see the Fed talk about perhaps firing up the printing presses again.

JUDY WOODRUFF: So, in a way, these numbers, these job numbers we see today in a way bear out what Ben Bernanke was saying.

GREG IP: Yes, they really do.

JUDY WOODRUFF: Greg Ip, thank you very much.

GREG IP: Thanks for having me.