April 2, 2010 — -- The U.S. economy added 162,000 jobs last month while the unemployment rate remained steady at 9.7 percent, the U.S. Labor Department reported this morning, adding evidence that the recovery from the tailspin set off by the economic crisis is well under way.
The payroll increase, the largest in three years, was slightly below the 190,000 new jobs economists were expecting. The U.S. government contributed significantly to the jobs increase: 48,000 of the jobs created came from the hiring of temporary workers for the U.S. Census.
The Census hiring in March, however, was lower than some were projecting. The Census is expected to hire of 1.2 million temp workers this year.
Joel L. Naroff, president and founder of Naroff Economic Advisors, said the jobs numbers show that "the recovery can now stand on its own."
"True, some estimates had the gains twice what actually occurred, but this is one case where the details are better than the headline," Naroff said in a note to clients. "The federal government didn't hire nearly as many Census workers as thought. It was the private sector that stepped up to the plate."
In addition to the government, industries that added jobs last month included health care, mining, manufacturing and construction. Companies may have boosted payrolls in March in part to compensate for reduced hiring during February's bad weather, Mark Zandi, chief economist for Moody's Economy.com, said this week.
The new jobs numbers don't mean much to Wilton, Conn., resident Sean Byrnes.
About a month ago, the 41-year-old father of four lost his job as a salesman at a Manhattan-based financial research firm. He has struggled to find so much as even a job interview since then. Last month, Byrnes was one of 15 million unemployed Americans who searched in vain for work.
"I talk to headhunters and they say the same thing," he says. "No one is hiring."
The financial services industry shed 21,000 jobs last month, according to today's government report.
One piece of economic data that has caught the attention of Byrnes, and others in his predicament, is a fairly staggering figure that comes out of the Bureau of Economic Analysis: Despite widespread unemployment, the BEA reports that U.S. corporations, reluctant to expand in an uncertain economy, are sitting on $1.6 trillion in cash reserves, a record amount, according to BEA economist Greg Key.
Even looking at the companies in the Standard & Poor's 500 index of blue chips -- and stripping out financials, which are required by regulators to keep large cash reserves in order to cushion against risk -- the cash on hand number is still rather monstrous: $1.1 trillion. To put that in perspective, as a percentage of companies' total market capitalization, that $1.1 trillion is more than double the ratio seen before the crisis.
"Cash is piling up faster than companies can figure out what to do with it," said David Bianco, head of U.S. equity strategy at Bank of America.
Asked about the mountain of corporate money sitting on the sidelines, the out-of-work Byrnes offered his own suggestion for what to do with it.
"Companies should absolutely spend some of that money to put people back to work," Byrnes said by telephone earlier this week, clearly frustrated. "I suppose they need to make shareholders happy, but come on already."
Companies Not Spending Cash on New Hires
Actually, according to Bianco, shareholders will soon start to demand that cordoned off cash be put to work, either through some form of growth initiative or at the very least used to pay out a higher dividend. In either case, it's not expected that the cash being hoarded will at any point translate into rapid hiring.
"Companies slashed their work forces and now find that they could function far more resourcefully than they ever realized possible," Bianco said. "If anything, we could start to see some of the money being used to expand overseas or to acquire other companies. In either case, that does not bode well for job creation. In fact, mergers lead to job reductions unfortunately."
Bianco expects 9 percent-plus unemployment to persist though the end of next year. In other words, if there is a recovery it will be slight and a jobless one, as many have feared.
The government, meanwhile, is working hard to spur hiring.
Alan Krueger, assistant secretary for economic policy at the U.S. Department of the Treasury, points out that President Obama recently signed a jobs creation act known as HIRE which includes a variety of incentives. HIRE, for example, exempts companies from paying social security payroll tax if they hire someone who has been out of work for more than two months, and offers them a $1000 cash bonus if they retain the worker for a full year.
He adds that the administration has also been focused on stabilizing financial markets and fuelling consumer demand, two measures which in the long run should start boosting the need for workers.
"We've been trying to set conditions so companies can feel more confident to expand," says Krueger, pointing to efforts such as the Financial Stability Plan and the American Recovery and Reinvestment Act. "As companies become more confident that markets have stabilized, they will be more willing to take risks and invest their cash reserves."
Hiring to Make Money
Regardless of how many hiring incentives the government passes, experts say the jobs market faces a long, tough recovery. Companies simply won't begin to hire workers unless they see a valid business reason to do so. As long as the economic outlook remains cloudy, employers will continue to hold on to their reserves, predicts Rene Stulz, a finance professor at Ohio State University and an expert in cash reserves.
"It makes sense to put cash [...] in hiring people if you can make money. It doesn't make sense to take the cash and hire people if you're going to make losses," he said.
With reports from ABC News' Alice Gomstyn.