U.S. Economy Adds Over 100K Jobs, Wages Still Lag

 

Roy Maurer By Roy Maurer April 6, 2018
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Job growth hit a speed bump in March, but is continuing to trend in a positive direction, with a net gain of 103,000 new jobs added, according to the latest employment report from the Bureau of Labor Statistics (BLS). 

"Job gains in March were well below most economists' expectations, but with an economy at full employment and after 90 consecutive months of job gains, it represents solid growth in the labor market," said Andrew Chamberlain, chief economist at Glassdoor.

The unemployment rate for March stuck at 4.1 percent, an 18-year low and unchanged for the sixth consecutive month. It has been steadily declining since a peak of 10 percent in 2009.

Economists were predicting between 180,000 to 190,000 new jobs. The labor market hit a recent high of 326,000 jobs added in February and has hovered around the 200,000-mark for the past several months.

"The economy's break-even pace of job gains needed to keep unemployment steady is only around 110,000 new jobs each month, making March an on-target month in terms of jobs added," Chamberlain said. "Although the pace of job gains is slowing, that's normal for this stage of the business cycle, with few unemployed workers on the sidelines available to add to payrolls."

Experts agreed that monthly growth of over 200,000 new jobs is not in line with labor force growth. "We'll eventually have to get used to monthly gains of 100,000 or less," said Jed Kolko, chief economist at global search engine Indeed. "Growth in the 100,000 range is more than enough to keep up with the slow-growing working-age population."

Employment grew mostly in professional services, manufacturing and health care, with mining continuing to make a comeback after years of stagnation.

Professional services firms added 33,000 jobs in March, and 502,000 jobs over the year.

Manufacturing jobs increased by 22,000 over the month, with all of the gain in the durable goods sector. Over the year, manufacturing has added 232,000 jobs, with durable goods accounting for about three-fourths of jobs added.

Kolko noted that the impact to the industry of President Donald Trump's decision to place tariffs on foreign steel can't be measured yet. "Steel-producing industries lost a few jobs in March, while steel-consuming industries grew respectably," he said. "That's the opposite of how tariffs might eventually affect job growth."

Cathy Barrera, the chief economist for ZipRecruiter, an online employment marketplace, agreed, saying "While [manufacturing] has been on an upward trajectory for six months or so, it's unclear if, with the announced changes in trade policy, that trajectory can be maintained over the coming months."

Employment in health care continued to trend up in March (+22,000), with a gain of 16,000 new jobs in ambulatory health care services. Employment in mining increased by 9,000, with gains occurring in support activities (+6,000) and in oil and gas extraction (+2,000). Mining employment has risen by 78,000 since a recent low in October 2016.

Retailers lost 4,000 jobs net in March, after having increased by 47,000 in February. Employment declined by 13,000 in general merchandise stores last month, offsetting the previous month's gain. The construction industry contracted by 15,000 jobs in March, after a large gain of 65,000 in February.

Experts believe that bad weather was probably a factor in declining payrolls for weather-sensitive sectors like construction and recreation and hospitality. "There were signs of weather impacts on [job growth]," said Josh Wright, chief economist for recruitment software firm iCIMS. "Within construction, specialty trade contractors remained a larger swing factor than building construction. Specialty trade does plumbing and electrical, but also site preparation."

Unemployment for teenagers fell from 14.4 percent to 13.5 percent, while the jobless rates for adult men (3.7 percent), adult women (3.7 percent), Asians (3.1 percent), blacks (6.9 percent), Hispanics (5.1 percent) and whites (3.6 percent) stayed about the same.

The number of long-term unemployed (those jobless for 27 weeks or more) was reported at 1.3 million in March and accounted for 20.3 percent of the unemployed. "The continued decline in long-term unemployment is encouraging," Wright said. "That is an underappreciated sign that the private sector is reaching deeper into the labor pool—a harbinger of true labor market tightness."

The labor force participation rate dipped slightly from 63 percent to 62.9 percent and the prime-age employment-population ratio slipped a bit to 79.2 percent, the second-highest level—after last month—since 2008. The broader underemployment rate was at 8 percent, back to its lowest level since the end of 2006, Kolko noted.

Average hourly pay grew by 2.7 percent year-over-year, an improvement over February's 2.6 percent but still short of what's expected in a tight labor market with low unemployment and well below the 3 percent to 4 percent pace of wage gains before the Great Recession.

"The year-over-year wage growth rate continues to tick up, as expected given how tight the labor market currently is," Barrera said. "One reason wages did not rise as much as expected in 2017 could be that it can take some time for employers to adjust their recruiting strategies when those strategies are not working. In that case, we would expect growth to accelerate after a delay."

Wright pointed to the continued rise in people leaving jobs as a good sign for future wage growth. "Studies show that job switching is a major contributor to wage growth," he said.

“Job prospects are looking bright for people—providing they have the right skills,” said Becky Frankiewicz, president of ManpowerGroup North America. “Much of the future will depend on employers’ ability to attract and upskill more workers to meet the stimulated demand. Employers need to look for people with adjacent skills—skills that are closely connected and can be developed and applied to new roles.”

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