04/10/2013 08:38 pm ET

Cold March Chills Job Creation

Nonfarm payroll employment rose a dismal 88,000 in March, well below expectations. Job losses were heavily concentrated in areas affected by cooler-than-usual March weather. Retailers who couldn't sell spring merchandise decided to lay off workers and are now offering discounts; building and garden stores cut workers as spring planting and lawn work was delayed; and, manufacturing lost jobs in the textile, apparel and food categories.

Government employment shrunk by 7,000 jobs; a sharp drop in postal workers more than offset gains at the state and local levels. Look for federal layoffs to accelerate in April as the cuts associated with the sequester kick in. That started on March 1, but government workers need 30 days' notice by law, before being laid off or forced to take unpaid furloughs.

Construction employment remained a bright spot, with gains concentrated among specialty contractors. We also saw temporary, in-home healthcare and food-service jobs continue to rise. The problem is the quality of those jobs, because they pay significantly less than the high-wage manufacturing, construction and office jobs lost during the Great Recession. Indeed, average hourly earnings remained almost unchanged during the month.

Separately, the unemployment rate slipped to 7.6 percent from 7.7 percent, but for the wrong reason. The size of the labor force plummeted by 496,000, making the participation rate the lowest since 1979 -- another dismal year. The number of long-term unemployed was steady at 4.6 million while the total number of workers accepting part-time instead of full-time work decreased. That decline, however, was probably due to the drop in the labor force rather than an improvement in the number of full-time jobs.

Bottom Line: Last week's employment report was discouraging but not as bad as many might think, given the role that unusually cold weather played in dampening gains. The problem was more in the type of job gains, which remained heavily concentrated in low-wage professions. This, coupled with the pending losses associated with sequestration in April and May, will provide fodder for the doves at the Federal Reserve to keep the spigot fully open and continue with asset purchases in June.