Unemployment Jumps to 5.1%

April 8, 2008--The labor market continued to struggle in March, as employers shed 80,000 jobs. Adding to the sour mood, the BEA downwardly revised its figures for January and February, with each month reporting a loss of 76,000 jobs. Though the ISM remains below 50, it inched upward 0.3 to 48.6 in February. Factory orders, however, fell 1.3% in February.

 

Employment Situation
The labor market shed 80,000 jobs in March, following a downwardly revised 76,000 job loss in February. March's loss, coupled with the poor numbers from January and February, surprised analysts and provided further evidence that the economy may be entering a recession, if it's not already in one. Employers gave up 232,000 jobs during the first quarter of 2008. Manufacturers and builders slashed payrolls by 99,000 workers. Temporary help and trade employment also witnessed declines, losing 22,000 jobs and 17,000 jobs, respectively. Governments added 18,000 positions payrolls. Average hourly earnings fell to $17.64, a 0.9% decrease. Last, the unemployment rate surged 0.3% to 5.1%.

 

ISM Index
The Institute for Supply Management's Purchasing Managerh's Index (PMI) remained essentially unchanged in March at 48.6, a paltry 0.3 increase from February's level of 48.3.  For the second straight month, the PMI is below 50, the threshold for expansion.  Looking at the components of the headline number, new orders plummeted 2.6 points to 46.5, but backlogs increased to 47.5 from 45.0. Production fell 2 points to 48.7. In the early stages of production, inflation remains a concern as prices paid surged sharply by 8 points to 83.5. If current conditions hold, analysts expect the ISM to remain between 45 and 50 during the first half of the year.

 

Factory Orders
Factory orders fell a greater than anticipated 1.3% in February after an upwardly revised 2.3% decrease in January. Orders for core capital goods, which are a proxy for business investment spending decreased at a rate of 2.4% for the month.  A 2.7% decrease in durable goods led the overall fall in shipments. Furthermore, shipments fell by 2.1%. Inventories and unfilled orders both grew, at a rate of 0.5% and 0.9%, respectively.