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By Jason Stipp | 04-01-2011 09:33 AM

Real, but Slow Improvement in Jobs

Employment growth may not be as fast as we want, but the data is backed by a fundamental improvement, says Morningstar's Vishnu Lekraj.

Jason Stipp: I'm Jason Stipp from Morningstar. The economy added 216,000 jobs in March, and the unemployment rate ticked down to 8.8%, according to the government's labor report released on Friday.

Here with me to dig into the details of that report is Vishnu Lekraj, he's an equity analyst covering the employment sector. Bob Johnson, who normally joins our conversation, is on vacation this week.

Thanks for joining me, Vishnu.

Vishnu Lekraj: Good to be here, Jason.

Stipp: So you had a forecast that was a bit higher than consensus; the numbers on Friday were also better than the consensus expectations. What did you think of that top-line addition that we saw?

Lekraj: They were excellent. The private sector grew 230,000 jobs over the month of March, which came in at the top end of my consensus, which is great news, and almost every category within this report grew jobs, except for some--obviously the construction sector and whatnot--but it was a really strong report overall, I believe.

Stipp: So 230,000 in the private sector, so actually the top line number was 216,000, we lost some from government, correct?

Lekraj: Right, government fell about [14,000]. Most of that was from local governments, which was expected. The theme, last video and now, and going to be into the future: states, local, and federal government, they are into trouble with their budget. Don't expect any hiring from them for a while.

Stipp: Okay. Let's talk a little bit about the unemployment rate. So this has dropped quite a bit in the last few months, about one percentage point. We're down to 8.8%. What is behind that drop and what are the factors that lead to it coming down a lot faster than people expected?

Lekraj: Right. There's always some skepticism behind that number when it drops. Maybe the government was sleight of hand, took out some folks from the employment market. But that's not what's happening. What's happening is that jobs are growing and people are finding jobs, may not be at a fast pace or as fast a pace as we want it to be, but people are finding jobs.

When you look at the participation rates, they held steady; when you look at the raw number of people that are employed versus unemployed, that's gone up, while the unemployed folks have gone down.

Stipp: So certainly when you look behind the numbers, it is a trend, maybe not as much improvement in the actual number of jobs added as we'd like.

Lekraj: Right.

Stipp: But that unemployment rate is falling, and it's falling for the right reasons.

Lekraj: Exactly.

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