Job growth slows

Rich Yamarone, economic research director at Argus Research, agreed, saying in a note that "this softer pace of job creation is not alarming, but consistent with an economy that is in a moderating mode."

But he warned of an "oil-induced soft patch," much like the one seen in 2004, that could lead to a string of subpar employment reports.

The latest payroll figure was particularly disappointing after the robust growth in February, when the employers added 243,000 jobs. In the economic expansion of the late 1990s, the economy regularly added 250,000 to 300,000 jobs a month and sometimes far more.

Other than a brief three-month stretch last year, that kind of growth has not been seen in the current expansion that began in late 2001. And given the Fed’s determination to raise interest rates — and the transformation of the world economy over the past decade — it seems unreasonable to expect such strong growth anytime in the near future.

“If you keep getting a number that is a lot lower than you expect, then you either have to change your expectations or continue to be disappointed,” said John Silvia, chief economist at Wachovia Securities.

He and other analysts say companies have become more adept at squeezing production out of their existing permanent and temporary workers, even in the face of rising demand.

“We continue to see an economy where the productivity really does make a difference,” Silvia said.

Like most analysts, Silvia expects the Fed to raise benchmark short-term rates steadily by a quarter-percentage point at each of the next two scheduled meetings of policy-makers, and probably beyond. There is currently no reason to expect a more aggressive half-point increase from the central bank, he said.

Even with the relatively slow employment growth, the economy probably grew at a respectable 4 percent rate in the just-ended first quarter, said Ed McKelvey, senior economist at Goldman Sachs. But in the second half of the year, growth is likely to slow as the long series of Fed rate hikes begins to bite and overextended consumers begin to pull back on spending, he said.

“Look for the economic slowdown to commence in the second half of the year,” agreed Rosenberg of Merrill Lynch.

He pointed out that over the past 20 years the economy has consistently slowed beginning about a year after the Fed began to raise rates.

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