the report

At 8:30 edt this morning, the Bureau of Labor Statistics of the Labor Department released its monthly Employment Situation Report for March.

Job gains for March came in at +88,000 net new positions, a sharp decline from the +236,000 new jobs reported for February.  The figure was also considerably below the consensus of private economic forecasters, +190,000  …as well as of the more bearish of them, who were suggesting +150,000 was more likely.

The private sector gained +95,000 jobs; government subtracted -7,000, due to a loss of -12,000 postal workers.

Construction and retail were the weakest areas month on month, suggesting that cold weather may have had a hand in how the numbers played out.  Still, the March jobs figure was surprisingly bad.

What makes the situation more curious is

the revisions

Not all the government survey respondents get their figures in on time.  So each monthly ES is revised twice, once in each of the following two months.  In contrast to the March ES numbers, the revisions for January and February are both strongly positive.  

–The February figure rises from +236,000 to +268,000, on the addition of +8,000 private sector jobs and +24,000 in government.

–The January figure goes from +119,000 to +148,000, on the addition of +24,000 new private sector jobs plus fewer layoffs in government.

Together, the revisions boost job growth by +61,000 new jobs.

what’s going on?

No one really knows.

The March figures might not reflect the true job situation, either because of the weather or because of some quirk of the seasonal adjusting the BLS does to the numbers.  It may also be that strong construction and retail hiring earlier in the year “stole” some jobs from March.

Or it could be that something happened to the economy in March that caused employers to rein in hiring.  The most benign explanation I can think in this vein is fear of the sequester.  In one sense, this really shouldn’t be the case, since the sequester is only about 1/7th the size of the fiscal cliff–and employers were hiring at a +200,000 monthly clip as the “cliff” approached.  On the other hand, maybe the sequester is realer than the cliff ever was.  And all the noise coming from both  political parties suggested that Washington might, instead of trying to minimize the economic minus the sequester will cause, try to make the sequester as harmful as possible, just to score bureaucratic/partisan points.

If I had to guess, and I don’t want to, I’d say that the real job gains are around +150,000 and that we’ll see in a month or two that temporary statistical noise is obscuring this.

what’s an equity investor to do?

One bad jobs number doesn’t change the economic recovery story for the US.  In fact, if we take the +88,000 as the unvarnished truth, it reinforces my strategy of staying away for now from the most highly cyclical sectors, like Materials.

For what it’s worth, I have two rules for days like today, which, as I’m writing, is showing some stomach-churning falls in individual stocks:

1.  don’t do something crazy that I’ll regret in two or three months, and

2.  try to upgrade the portfolio.

On down days with wide swings like we’ve been having the past week or so, typically the stocks that have been showing the greatest relative price strength–and which have the best growth prospects– tend to go down the most.  That’s most often solely because they’ve produced the greatest gains.

The only ones that don’t go down are the doggy ones that haven’t gone up–and which will presumably be left behind in the dust again when the market resumes its rise.  A day like this gives all of us a chance to trade in that loser we’ve irrationally been holding onto (please don’t tell me there aren’t any in your portfolio–that just means you aren’t looking hard enough) for a better model at a more favorable price.