Unemployment across the US fell to 3.9 percent last month, its lowest level since December 2000, the latest jobs report from the Bureau of Labor Statistics showed, as the economy added 164,000 jobs. The increase in jobs was below the average monthly gain of 191,000 over the prior 12 months and the median estimate of 193,000 provided by economists to Bloomberg. However, job gains from the previous two months were also revised upward by a net 30,000 jobs. A broader measure of unemployment, including those marginally attached to the labor force or employed part time for economic reasons, fell from 8 percent in March to 7.8 percent in April.
Wage growth remained slow, however, with average hourly earnings rising 4 cents to $26.84, representing a 2.6 percent year-over-year-increase. That figure has dwindled from 2.9 percent in January, dampening hopes that the tight labor market would finally lead to accelerating wage growth for American workers. Nonetheless, Josh Wright, Chief Economist at iCIMS, tells the Washington Post that it’s “an exciting headline for the worker”:
“A real Goldilocks number, with job growth being great.” But pay stayed flat, so the Federal Reserve won’t likely feel pressure to raise rates before June. In other words, Wright said, the markets should respond favorably. “What we’re seeing here is steadiness,” he said. …
If the expansion further gains steam, analysts at the Fed said the unemployment rate could reach 3.7 percent this year, a figure not seen since 1969.
Also, the New York Times points out, “A year-over-year increase of 3 percent in hourly earnings is considered the trip wire that could prompt the Federal Reserve to raise its benchmark interest rate more aggressively than it has signaled”:
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US nonfarm payrolls rose by a seasonally adjusted 103,000 in March, while the more robust numbers from January and February were revised downward by a cumulative 50,000 in Friday’s monthly report from the Bureau of Labor Statistics, representing a marked decline from February, when the workforce grew at the strongest monthly rate since July 2016. The unemployment rate held steady at 4.1 percent for a sixth month, still the lowest since December 2000, while wages rose only slightly, by 8 cents an hour for a year-over-year increase of 2.7 percent.
Labor force participation fell incrementally from 63.0 percent in February to 62.9 percent in March. That’s better than the recent low of 62.3 percent in 2015, but the rate remains nearly the lowest the US has seen since the late 1970s, the Wall Street Journal’s Eric Morath observes. With the economy at approximately full employment, the government and employers alike are hoping to entice more non-working Americans off the sidelines, but have had limited success so far in that endeavor.
Friday’s numbers fell short of expectations. Economists surveyed by the Journal had predicted 178,000 new jobs and an unemployment rate of 4.0 percent. ADP’s independent monthly report, released on Wednesday, said companies had added 241,000 jobs last month. ADP’s numbers always tend to be higher those from the BLS, but this month’s divergence is unusually wide.
One possible factor in March’s sharp decline is the weather: The US was hit with a series of late winter storms this year, and as Washington Post economics correspondent Heather Long noted, there was major snowfall the week the BLS conducted its survey, which may have depressed its count and could mean these figures will be revised upward in future reports.
For Ben Casselman, economics reporter at the New York Times, the big-picture takeaways from the jobs numbers in early 2018 are that wage growth is still slower than economists would tend to expect and would like to see given the tightness of the labor market, and that while labor force participation isn’t falling off due to retirements in an aging workforce, Americans are not returning to the workforce in sufficient numbers to fill the shortages in the labor pool:
The February employment figures from the Bureau of Labor Statistics, released on Friday, depict a strong labor market, with the US economy adding 313,000 jobs: the largest monthly increase since July 2016 and extending the longest recorded labor market expansion in US history into its 89th month. Job growth figures were also revised upward for December and January by a total of 54,000. The unemployment rate held steady for the fifth month straight at 4.1 percent, the lowest rate since December 2000.
Economists had expected growth of around 200,000 jobs. Some observers attribute the spike in hiring to the massive corporate tax cut passed by Congress in December, but this is not a consensus view, the Washington Post reports:
“This is a result of fiscal stimulus — in other words: a $1.3 billion tax cut,” [Glassdoor chief economist Andrew Chamberlain] said. “Businesses are making decisions on a forward-looking basis. Even if the dollars aren’t in the pockets of companies yet, they’re making plans.”
Cathy Barrera, head economist at ZipRecuiter, an employment site, questioned that interpretation, asserting it’s still too early to see an impact from the tax measure. “Really for businesses, what matters is demand for their products,” she said. “If demand for products hasn’t gone up, there’s not more work for these companies to be doing.”
The only piece of not-so-great news in Friday’s jobs report was that February did not deliver the acceleration in wage growth that many economists were hoping for. Average hourly earnings for private nonfarm employees rose by 4 cents to $26.75, for a year-over-year figure of 2.6 percent, lower than the 2.9 percent figure reported for January (revised downward in this month’s report to 2.8 percent).
The combination of large job growth and low wage growth was reassuring news for Wall Street, the New York Times adds, as it points to continued economic expansion but eases fears of runaway inflation:
The US economy added 228,000 jobs in the month of November, outperforming economists’ expectations, while the unemployment rate remained at 4.1 percent, its lowest since 2000, according to the latest figures from the Department of Labor. Average earnings rose by five cents an hour, resulting in a total increase of 64 cents, or 2.5 percent, in the past year.
The jobs report reflects the continued strength of the American economy, with wage growth finally starting to pick up after a years-long period of stagnation despite of a historically tight labor market. It also shows that the mainland US has rebounded strongly from the major hurricanes that did extensive damage to Florida and Texas in September. The small job loss reported that month was later upward to a small gain, meaning the US has added jobs for 86 consecutive months. The monthly figures do not cover the territories of Puerto Rico and the US Virgin Islands, however, which were devastated by Hurricane Maria and are still struggling to rebuild.
The problem remains that the tightness of the labor market isn’t translating into real earnings growth for US workers, as most economic models predict it should. With talent in short supply, employers are under pressure to raise wages, the New York Times reports, and the slower-than-expected wage growth over the past year may reflect businesses being unable to afford the wages candidates are demanding:
Most economists expect wage growth to pick up as the unemployment rate falls. Other measures of earnings have already shown modestly faster gains, and there are signs that businesses are feeling pressure to raise pay. For the first time in six years, chief executives surveyed by the Business Roundtable, a coalition of big corporations, reported that labor expenses were their biggest cost pressure in the fourth quarter.
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After a September jobs report marred by the impact of Hurricanes Harvey and Irma, October’s monthly data from the Bureau of Labor Statistics shows the US labor market rapidly rebounding from these disasters, with non-farm employment rising by a seasonally adjusted 261,000 last month. Although this did not meet economists’ expectations of 315,000 new jobs, it was a huge improvement from September. Figures for that month were also revised upward from 33,000 jobs lost to 18,000 jobs gained, meaning the US remains on a record 85-month job growth streak.
Unemployment fell to 4.1 percent, its lowest level since December 2000, but wage growth was stagnant at 2.4 percent year-over-year, a slowdown over the previous month. “With the swings from the hurricanes now largely behind us, the longer-term challenge of wage growth returns to the foreground,” Jed Kolko, chief economist at Indeed, commented to the Wall Street Journal.
The labor force participation rate also fell by 0.4 percentage points in October, to 62.7 percent, which suggests that even as the economy approaches nominally full employment, there remain many Americans who are neither working nor looking for work. Accordingly, re-engaging those labor force dropouts could become an increasingly important strategy for US organizations that want to expand their workforces in the current labor market.
“The bigger picture here is that the labor market’s fine,” Brett Ryan, an economist at Deutsche Bank, explains to the New York Times. Fine, however, is not necessarily great, as the labor force participation and wage figures suggest:
The US economy added a robust 222,000 jobs last month, outpacing economists’ predictions of 179,000, while data from April and May was revised upward by 47,000 jobs, Reuters reports:
While the unemployment rate rose to 4.4 percent from a 16-year low of 4.3 percent in May, that was because more people were looking for work, a sign of confidence in the labor market. The jobless rate has fallen four-tenths of a percentage point this year and is near the most recent Fed median forecast for 2017. The average workweek increased to 34.5 hours from 34.4 hours in May.
But stubbornly sluggish wage growth put a wrinkle in the otherwise upbeat report. Average hourly earnings increased four cents, or 0.2 percent, in June after gaining 0.1 percent in May. That lifted the year-on-year wage increase to 2.5 percent from 2.4 percent in May. … There is optimism that the tightening labor market will soon spur faster wage growth amid growing anecdotal evidence of companies struggling to find qualified workers.
Notwithstanding the lackluster wage gains, the jobs report is unlikely to deter the Federal Reserve from its plans to continue gradually raising its benchmark interest rate this year, but one economist suggests to the New York Times that the Fed might want to consider letting the unemployment rate keep falling:
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The US economy added 227,000 jobs in January, significantly outperforming predictions, but unemployment ticked up to 4.8 percent and average hourly earnings rising only 3 cents, the Bureau of Labor Statistics reported on Friday. Job growth was strongest in the retail, construction, and financial sectors, each of which added tens of thousands of positions. The number of full-time jobs rose by 457,000 to 124.7 million, while part-time jobs fell by 490,000 to 27.4 million, according to the BLS’s household survey, and the labor force participation rate rose by 0.2 percentage points to 62.9 percent.
While job growth remained robust in the last month of the Obama administration, the stagnant wage figure may give the Federal Reserve cause to think twice before raising interest rates, Yahoo Finance’s Myles Udland observes:
Following Friday’s report, Neil Dutta, an economist at Renaissance Macro said, “[The] Fed has no need to rush. Participation rate rose and hourly earnings were soft but workweek extended and jobs rose nicely.”
The uptick in the labor force participation rate is, aside from the headline job gains, perhaps the most positive part of this report, as it indicates folks who had likely been completely done looking for work again sought to come back into the labor force. This broadly squares with improving consumer and business sentiment readings we’ve seen since the election, as taking the leap of faith to move from not looking for work at all to attempting to find a job requires some level of confidence about the economy.
Rising employment figures may look like good news for the recently inaugurated President Donald Trump, but Business Insider‘s Elena Holodny points out that this report does not reflect anything that has happened since Trump was inaugurated: