Historically, it's still impossible to call 4.3 percent unemployment a recessionary number, but the trend watch — and what another bad number for April could mean for consumer sentiment — is now officially on. In a TIME.com Q&A, TIME senior economics reporter Bernie Baumohl takes a look at the report and its implication.
TIME.com: How bad is the report?
BB: It's obviously disappointing, but not totally unexpected. The economy, though still avoiding a recession, is quite weak. But if you look at the overall picture, there's some good aspects to this.
First of all, 4.3 percent is still remarkably low, especially nine months after the economy started to weaken. Even if we look ahead and imagine that unemployment is going to creep up to 5, 5.5 percent, that would still be the lowest level in any recession in modern history. With all these layoffs, we still have more than 95 percent of the labor force working.
Of the 86,000 non-farm jobs that were cut, 81,000 were in the manufacturing sector, which we already know is in a recession. And there were some other good signs. Average hourly earnings actually rose in March, along with average weekly pay. And hours worked were up too. If the economy was truly in a contractionary phase, hours worked would be shrinking.
So even though the unemployment inched up a notch, companies are still having workers work longer, and they're earning more. If the economy was really weak, we wouldn't see these increases. So I think the markets overreacted a bit this morning.
Speaking of the markets, didn't bad news for Main Street used to mean good news for Wall Street? What gives?
BB: It's the Fed. Over the last couple of days, Fed governors have been coming out and saying that the economy isn't all that bad. Wall Street, of course, disagrees, and they're convinced Greenspan and the Fed are way behind the curve. The markets see a report like this as proof that they're right, and yet with the May 15 meeting a month away, they don't see the Fed stepping in between meetings to cut rates any further. Without the prospect of lower rates, bad news for Main Street is bad news for Wall Street too.
Is it ever going to be bad news in the Fed's eyes?
BB: Next month's number for April — which will come out a week or so before the Fed meeting — will be critical. What the Fed is worried most about is consumer sentiment, and if the unemployment number, low as it may be historically, becomes a consistent upward trend, that has the potential to finally convince consumers that things are getting worse and we're slipping into a recession.
And of course if consumers stop spending, then the last leg that's holding up this economy collapses, and a recession becomes very likely. It's self-fulfilling. So the Fed will continue to watch very carefully the consumer confidence numbers, retail sales and anything related to employment that could put people who are still working in real fear for their jobs. The April number is therefore critical in terms of what the Fed will do on May 15.