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By Jeremy Glaser and Robert Johnson, CFA | 04-03-2013 11:00 AM

Another Spring Slump for Jobs?

Signs point to softer March employment numbers once again for Friday's jobs report, but Morningstar's Bob Johnson says it's part of a consistent slow and steady growth trend.

Jeremy Glaser: For Morningstar, I’m Jeremy Glaser. After February’s better-than-expected jobs report, expectations for March's employment numbers have been somewhat muted. I am here today with Bob Johnson. He is the director of economic analysis at Morningstar. We'll take a look at some of the data we have and what his expectations are for Friday. Bob, thanks for joining me.

Bob Johnson: Great to be here.

Glaser: The ADP report from March, which is closely watched ahead of the official numbers on Friday, was a little bit weak. Is this a sign that we're going to enter another spring slump like we've seen over the last couple of years?

Johnson: That makes a great story, and I think that if you look back over the last three years, you've seen this kind of spring slump. I don't think that it's necessarily so much as a slump as it is that the seasonal factors just haven't caught up a little bit with the way the world operates. I do think that there is a good shot, and the ADP report Wednesday was pretty indicative of that, that we're having a little bit softer March than February in terms of the ADP numbers. But again, I think we're complementing ourselves too much if we think we can measure the month-to-month volatility in some of these numbers, and I really don't think we're having a slump and the bust that everybody [thinks]. I think we're just at this slow kind of dissatisfying 1.8%, 1.9% employment growth. And I think we're still there. The numbers are indicative of that, and it all still fits the pattern.

Glaser: So let’s take a deeper dive into those ADP numbers. What did you see this month, anything from that volatility standpoint standout to you?

Johnson: Yeah. Just talking about the volatility, we seem to have had a good month in December; a bad month in January; a good month in February; and now a bad month in March, we seem to almost be going in an alternating pattern, which seems to indicate to me that maybe--I assure you that the economy isn’t jumping and starting like that every month. If you know how long it takes to hire somebody and bring them in and the decision process to fire somebody, this isn't the reality of the world. If you averaged two months together, then you're probably a little bit closer to reality.

So, I do think this month this number was off, to give you some flavor. Now they did revise February up a lot in the ADP report, the 237,000 jobs added. But then in the ADP report it dropped down all the way to 158,000 this month, but that's not totally unexpected. The consensus figures for Friday for the employment report is to drop back also from kind of the mid-200,000s to about 190,000 jobs added in total to the economy. And that's the number we all expect to see on Friday. And so not really anything too surprising. The ADP report is consistent with that drop.

Glaser: What about individual sectors, anything interesting going on there? I know we've been following housing as a potential driver. What was happening in construction?

Johnson: Yeah, a good question. The whole construction and manufacturing part of the report was probably a little bit weak, and the construction part, again, isn't that I think that people stop building homes, or there is less interest in building or anything like that. I think March was a cold, very snowy month, and a lot of the March data we've seen has been impacted by, frankly, not even being able to get to some of the construction sites. The snow has been so bad. You can see in some of the numbers where the Northeast and the Midwest are kind of poor in terms of the data, but California and the South are OK.

So, I won't read a lot into it. But there was no construction growth, and frankly the housing starts continued to do relatively well. The construction report for the month of February was also quite good when it came in. So I really think that we were OK in terms of construction, but it may not show up in this month's employment report, unfortunately. Manufacturing was a little bit soft. I mean, they added about 6,000 jobs. Almost all of the growth was on the services side of the economy. Retail did about 22,000 jobs; it was a little better than I would have thought. The temporary help and business services category did well. It was the best-performing category; it added about 39,000 jobs. So, by sector, I think those were really the key takeaways.

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