Today's report on payrolls is disappointing but not nearly as bad as many are making it out to be. Reports on layoffs in February ran below the level of February 2007 and unemployment claims are not signaling recession. What we have is a temporary hiring freeze at many firms in response to fears of a recession, not the kind of layoffs that occur during actual recessions.

In addition, the February number may have been influenced by heavy snow that covered much of the US, particularly in the Midwest, which contains much of our nation's manufacturing sector. This was layered on top of another understandable 26,000 loss in home building jobs. The overall decline in payrolls in February is the second straight monthly drop, which rarely happens outside recessions.

However, this is the first business cycle in history when Baby Boomers have started to retire. Negative payrolls in the 1980s and 1990s would have been a very bad sign given trend payroll growth of 200,000+ per month. In a world with trend payroll growth near 100,000, payroll declines are less indicative of recession.

Also, the recent weakening in the labor market resembles the acceleration of post-recession job loses in early 2003, as fears mounted about the war with Iraq. That weakening was temporary, and we expect recent weakness to be temporary too. We were glad to see the unemployment rate tick down to 4.8% and note that the measure of the unemployment rate that includes "discouraged workers" also ticked down.