Hidden bad signs in a good jobs report

From Phil Izzo of The Wall Street Journal on April 1:

There was lots of good news in Friday’s jobs report, but there are still some caveats to keep in mind.

Overall the economy added 216,000 jobs in March, and the unemployment rate dropped to 8.8%. The gain in jobs was relatively broad-based, though with some sectors still lagging. Meanwhile, the unemployment rate improvement was based on more people working, not just discouraged workers dropping out of the labor force. In fact, the labor force rose more than the general population, indicating the market has improved enough to draw some of the unemployed back into the pool of workers.

But the jobs report is a lagging indicator, and some of the issues that have led economists to scale back growth forecasts for this year aren’t yet reflected in this report. One potential area of difficulty is disruptions in manufacturing supply chains caused by the Japanese earthquake, the ripple effects of which might not be felt for weeks or months. Manufacturing added jobs in March, but there might be some difficulties ahead.

Meanwhile, prices of food and oil have been increasing, sparking worries about consumer spending. If more people have jobs, that mutes those fears a bit. But today’s report notes that wages were unchanged. If prices are going up but workers aren’t getting paid more, it spells good news for companies who can keep labor costs low, but suggests continued struggles for consumers.

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