COMMENTARY | COLUMNISTS | GEORGE CHAMBERLIN

Markets easily swayed by employment report

There's nothing like a government employment report to throw the financial markets into a tizzy and make analysts second-guess their opinions about the course of the economy.

Friday's report from the Department of Labor regarding the job market in March was a perfect example. The reading was well below the consensus of economists who had been looking for payrolls to rise by 200,000, in line with previous months in 2013.

However, when the report hit the wires one hour before the start of trading it was a shocker. As it turns out, payrolls rose by just 88,000, the lowest level in 10 months. The report also added the initial employment reports for January and February were revised higher by a total of 61,000.

It was the headline news that sent the Dow Jones Industrial Average down more than 170 points in the first few minutes of trading. Yet, by the close, the index had recovered significantly, cutting the losses to just 40.86 points at 14,565.25.

Tony Cherin, a professor at San Diego State University, summed up the day's activity: "One relatively weak report does not a trend make. Markets are both overly optimistic and pessimistic on a daily basis,” he said.

Even so, the report raises questions about the state of the economy, if not the financial markets. A number of currents are making it difficult for businesses to make long-term decisions about hiring.

“Construction employment gains paused as the rebuilding surge in the wake of Superstorm Sandy ended," said Mark Zandi, chief economist at Moody's Analytics. "Anticipation of health care reform may also be weighing on employment at companies with close to 50 employees. The job market continues to improve, but in fits and starts."

The small businesses referred to by Zandi are, indeed, in a state of confusion. Two surveys last week regarding the hiring plans of smaller companies were dramatically different.

According to the CBIZ Payroll Services' small business employment index, hiring by companies with 300 employees or fewer rose in March with 27 percent planning to increase staffing while 19 percent anticipate cuts.

“For the time being, we can expect hiring trends to accelerate as the economic engine begins to outweigh drag forces such as government spending reductions and concerns over Europe's debt,” said Philip Noftsinger of CBIZ.

However, the Intuit Payroll small business index, following the hiring trends of businesses with 20 employees or less, saw a much slower rate of hiring compared to the CBIZ survey. Intuit reported hiring increased by just 0.06 percent in March nationwide and was unchanged in California.

“National employment is growing slowly, and small business employment is growing even more slowly," said economist Susan Woodward of Intuit. "While overall employment has risen 4.5 percent in three years, small business employment has risen only 1.4 percent over the same three years, an annual rate of half a percent per year."

Where agreement on the economy and employment seems to exist is where the ultimate solution has to come from. Steve Caldeira, president of the International Franchise Association said President Barack Obama and Congress need to “simplify the tax code and make it simpler and fairer for individuals and businesses. These policies will go a long way toward further improving the economic environment for the small business community at large on a long-term basis.”

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