U.S. Jobs Growth Cooled From a Boil to a Simmer in March
March’s Employment Situation Report from the Bureau of Labor Statistics (BLS) was mildly disappointing. Job creation in the latest month was only +98,000. In the past 24 months, the figure has been below +100,000 only one other time, +43,000 in May 2016. A number above +150,000 had been anticipated.
When there’s a shortfall relative to expectations, it’s advisable to have a close look at the revised results for recent previous months. It turns out that employment in February and January are now estimated to be -38,000 and -22,000 respectively compared with their levels as calculated a month ago. That’s a combined drop of -60,000.
Although the average month-to-month employment gain through the first quarter of this year is a still quite respectable +178,000, there has been a contraction in new job creation of -9.4% compared with Q1 of last year’s +196,000 (i.e., on average, January to March 2016).
The labor force participation rate stayed the same in March as in February, 63.0%, and in fact it was identical to March of 2016 as well.
The unemployment rate, however, tightened further. At 4.5%, it is now at its lowest level since before the Great Recession. Some analysts argue that the ‘official’ unemployment rate is not the ‘true’ unemployment rate; that there are many more people who have simply given up looking for work and that they’re not being given adequate representation.
Table A-15 in the Employment Situation Report sets out six different measurements of the jobless rate. The ‘official’ rate is U-3. The broadest possible definition of unemployment, which includes individuals ‘only marginally attached to the labor force’, as well as those working part-time who would prefer to be engaged full-time, is U-6.
U-6 has also come down significantly. Whereas a year ago, it was 9.8%, it is now 8.9%. The previous low point for U-6 prior to 2008-2009’s Big Dip was about 8.0%.
U.S. initial jobless claims as reported each Thursday morning in March stayed well below the benchmark 300,000 level. At an average near 250,000, they suggested that the job creation number for the entire month would be quite strong. Perhaps the problem has been that empty positions are available but employers are having trouble finding the right workers to fill them.
But if that were the case, an aggressive bidding up of salaries would normally be underway. Year-over-year average hourly and average weekly earnings in March were ahead by decent, but not stand-up-and-take-notice, amounts.
Average hourly earnings (y/y) for all jobs in the economy were +2.7%, including supervisory personnel, and +2.3% omitting bosses. Average weekly earnings, on the same basis, were +2.4% and +2.0%. At least +3.5% has to be reached consistently for the Federal Reserve to pay particular attention to the inflationary impacts of wages in its interest rate deliberations.
Nor does the most recent JOLTS Report indicate that new workplace positions are opening up much more rapidly than they are being filled.
After large gains in employment in January (+34,000) and February (+59,000), the construction sector managed an increase of only +6,000 in March.
The monthly average for the construction sector so far this year, at +33,000, has been +29% compared with the +26,000 average achieved in Q1 of last year.
Construction’s latest unemployment reading of 8.4% is an improvement on March 2016’s 8.7%.
Jobless rates in a number of key sectors have improved significantly. Manufacturing is now at 3.9% compared with 4.3% a year ago; ‘financial activities’, 2.3% versus 3.0%; the ‘leisure and hospitality’ sector, 6.3% versus 7.2%; and government, 1.8% versus 3.0%.
The unemployment rate in ‘mining, quarrying, oil and gas extraction’ has fallen by more than half, to 4.1% from 9.8% 12 months ago. This is a sector that a couple of years ago was devastated by a steep plunge in the global price of oil.
With crude having recovered to around $50 USD per barrel from as low as $30, profitability from domestic drilling and production activity has perked up. There have been positive ‘knock-on’ or ripple effects with respect to employment prospects in the industry.
Construction’s year-over-year wage gains have not been far off the all-jobs averages. In this latest March, average hourly earnings in construction were +2.4% including supervisory personnel and +2.7% omitting them.
Average weekly earnings in construction were +2.7% both with and without bosses.
U.S. manufacturing added 11,000 jobs in March, bringing its total for the year so far to +49,000. At the same time in 2016, manufacturing was in deficit by -4,000 jobs.
The retail sector has stumbled badly out of the gate in 2017. Employment among shopkeepers is presently -25,000 versus its level in December when the calendar flipped over.
‘Education and health’, which is usually a surefire source of good numbers on new staffing each month, also failed to deliver in March. A minimal (i.e., for this kind of work) +16,000-jobs increase was driven mainly by hiring at hospitals, +9,000.
Speaking of an ‘old reliable’, positions with ‘food services and drinking places’ rose by +22,000 in March. But the jobs increase for the ‘leisure and hospitality’ sector as a whole was only +9,000, as ‘arts, entertainment and recreation’ suffered a slide of -12,000.
The +9,000-jobs figure for government employment in March was all at the local level. An extra +1,000 jobs created by the states was washed out by Washington shedding workers to an equal but opposite degree.
Providing an advance indication that more construction work will soon be on the books, ‘architectural and engineering services’ firms added to their payrolls by +7,000 in March. Projects must be designed before groundbreaking field work is initiated.
The ‘real estate and rental and leasing firms’ industrial category, which encompasses the office-building developer segment of the economy, stood pat (+1,000) on employment in the latest month.
On a year-over-year percentage change basis, U.S. total employment in March was +1.5%; ‘services-providing’ jobs were +1.8%; manufacturing was +0.3%; and construction, +2.6%.
Among all major industrial sub-categories, construction’s +2.6% y/y jobs leap was beaten only by ‘professional and business services’, +3.2%.
The latter includes leading-edge endeavors in the high-tech realm, such as ‘computer systems design’ work, which had an outstanding +4.6% y/y ‘giddy-up’ in the latest month.