Friday’s jobs reportdefinitely put a cap on market enthusiasm, suggesting the recovery remains tepid.  Non-farm payrolls (NFP) added 120,000 jobs in March, well below the 200,000+ recorded over the last three months, indicating seasonal improvements (including warmer weather) , rather than a new phase of stronger job growth, underpins recent labor market strength.
While U.S. equity markets were closed for Good Friday, futures tanked; Dow futures indicate a 142 point decline which would send the index back to 13,000 points.  Underlying softness will definitely lead to renewed discussion about monetary accommodation and the possibility of Fed Chairman Ben Bernanke unleashing a third round of quantitative easing, or QE3.

Adding only 120,000 jobs in March means the unemployment rate ticked down to 8.2%, but all of that was due to a decline in the labor force participation rate, which remains stuck near record lows at 63.6%.  The total number of unemployed totals 12.7 million, while those without a job for 27 weeks or more (“long-term unemployment”) make up 42.5% of the labor force.  As Bernanke has repeatedly said, long-bouts of joblessness leads to structural unemployment as skills erode and potential workers fall further out of workforce.In what Nomura’s analysts called a “very disappointing report,” the Bureau of Labor Statistics announced meager job creation in March after what had been above-trend reports over the last couple of months.  Market expectations were high, with consensus calls for a 205,000 rise to NFPs, but the economy disappointed.

Another troubling sign is the high number of workers that are “marginally attached to the labor force,” or those that haven’t looked for a job in the last 4 weeks but are willing and able to work.  That number stays at a very elevated 2.4 million.
March NFPs missed expectations by a wide mark, suggesting market players and economists were over-optimistic about the economic...