The March jobs report is out, and it's depressing: The unemployment rate fell, but employers added 88,000 jobs last month, far fewer than expected. That's a huge drop from February's 268,000.
The numbers can be volatile, but the conversation about what causes the month-to-month shifts is even more so. Below, a guide to what's in and what's out in explaining what's behind the numbers:
Hot: Payroll Tax Hikes
And just when everyone blissfully agreed that they had no effect. Everyone's paychecks shrank slightly in January with the end of the payroll tax cut, and at first, it didn't seem to impact consumer confidence or jobs readings. Some economists still think we're in the clear, but there's a growing chorus of doubts.
"The impacts will be cumulative," says Patrick O'Keefe, director of economic research at accounting firm CohnReznick. "[Payroll tax changes] operate as a rheostat, not as an off-and-on switch. And so the drag that they impose on the economy will accumulate over the course of the year."
A little less money per paycheck may not affect many people's day-to-day spending, but it could affect their ability to save up for big-ticket purchases or vacations. That means effects spread out over several months, until people absorb the hikes. A lack of spending money may have shown up in the March jobs numbers, as the retail industry suffered the most of all industries, losing over 24,000 jobs.
Okay, so we're not going to suddenly forget about sequestration and its job market effects. But sequestration likely did not affect the March numbers, and there are growing doubts that sequestration will hurt jobs numbers as much as everyone once thought.
The Congressional Budget Office at one point estimated that the automatic spending cuts would mean 750,000 fewer jobs this year. But many think that estimate is a little steep. In a story casting doubt on sequestration's effects, Reuters cited an estimate closer to 300,000. And other experts say the effects will be minimal.
"I don't think there's going to be a big impact on the employment numbers at all," says Conrad DeQuadros, who points out that many sequestration cuts will result in furloughs, not job cuts. That means that effects will show up in the jobs report in the form of lower hours worked and weekly pay, but not necessarily to a great degree in terms of the number of jobs created.
Hot: Labor Force Participation Rate
Why did the unemployment rate go down when hiring is so frustratingly slow? Simple: math. o be counted as unemployed, you have to be both jobless and looking for a job. So a drop in the unemployment rate is either a sign that many more Americans are working or that many have dropped out of the labor force, which is defined as all Americans who are either working or looking for work.
The labor force participation rate fell 0.2 percentage points in March to 63.3, its lowest rate since 1979, signaling that the declining unemployment rate does not mean that more people are working. Whether it’s due to discouraged job seekers quitting the job search or to a shrinking pool of potential workers, as some argue, a shrinking labor force can mean a shrinking unemployment rate.”
Not: Spring Slump
In 2011, monthly job growth started strong, then hit a weak spot over the late spring and early summer. Last year, jobs started off with robust growth, then hit a rough patch in late spring and early summer.
It's not necessarily that the economy has been kicking into lower gear during warm weather. Rather, some experts call this the "spring slump"—an effect of seasonal adjustment factors knocked off-kilter by the recession. The monthly jobs numbers are seasonally adjusted, which takes out regular bumps from seasonal factors—things like the extra retail workers that regularly show up at Christmas. If seasonal adjustment was distorted, it could have made for regular annual slumps.
Yet as more time passes, any distortions in the numbers should diminish. Federal Reserve Chair Ben Bernanke commented last month that while seasonal adjustment may have affected 2010 and 2011's figures, "at this point, that we're far enough away from the recession that those seasonal factors ought to be pretty much washing out by now."
Hot: Affordable Care Act
Though it was passed three years ago, the Affordable Care Act may now start to drag down the job market. That's because a provision that goes into effect in 2014 requires employers with 50 or more full-time employees to provide insurance to its workers or pay a fine. It is possible that employers will pull back on hiring in order to be able to provide insurance, or pull back on hours for their employees to make less of them "full-time." Speaking to reporters this week, Moody's Analytics chief economist Mark Zandi said this may already be affecting hiring.
Not: Affordable Care Act
The Affordable Care Act is far more politically polarizing than the labor force participation rate or even sequestration. Therefore, for every argument that Obamacare is destroying jobs, expect to hear another vehement argument that it creates them. Some people argue that, because more people will be insured and visiting doctors, there will be more hiring in health care, not to mention at insurance companies and pharmaceutical manufacturers. And if both this and the job-killing argument are true, it could mean a more subtle effect on jobs numbers. So even if it's difficult to discern how health care reform will affect jobs in the year ahead, it's at the very least sure to be a hot topic.