Employment Growth In US Is Well Below Forecast

The BLS reported that only 120,000 jobs were added in March. This was well below the expected increase based upon the 200,000 estimate reported by the firm that processes paychecks for businesses. Part of the problem is that the public sector has been shedding around 20,000 jobs per month. The unemployment rate fell, however, from 8.3% to 8.2%. The implication is that the number of discouraged workers has increased. Those who stop looking for a job are no longer counted in the labor force. The unemployment rate is the number of unemployed divided by the size of the labor force.

The slow recovery from the recession has stimulated two issues. The Fed is mandated to provide price and employment stability. Inflation seems to be under more control than inflation. This will increase speculation on whether the Fed will take actions to reduce the unemployment rate. There is also a debate within the Fed, and elsewhere, on the potential output of the US economy. Some believe that the capacity of the US economy to produce goods and services has declined. That implies that the unemployment rate has increased because of structural factors that reduce the potential for employment. Monetary and fiscal policy have typically been used to moderate the effects of the business cycle on employment.