U.S. Economic Snapshot

By Thomas Cooley and Peter Rupert

The BLS announced that nonfarm payroll employment rose by 103,000 in March and revised February employment up 13,000 to 326,000 and January down 63,000 to 176,000. The 50,000 in downward revisions and the weak 103,000 March number paints a fairly different picture of the labor market…one not quite as strong as it was just yesterday.

The sharp drop off may well have been weather related as the construction sector lost some 15,000 jobs in March.

Looking at the data over a longer period of time with a 12 month moving average suggests that employment growth has been slowing for some time. But this is the ninth year of an expansion and the fact that the economy is continuing to add jobs at a good pace is encouraging, the March hiccup notwithstanding.

Average hourly earnings increased 8 cents and is up 2.7% since last year and with low inflation has lead to real wage gains. Average weekly hours remained at 34.5.

The household survey reveals a decline of 158,000 in the labor force with the participation rate falling from 63.0 to 62.9. The unemployment rate fell slightly from 4.14% to 4.07%.

By Thomas Cooley and Peter Rupert

The February payroll employment numbers crushed all preliminary forecasts (in the 200k ballpark) by increasing 313,000. In addition, January employment was revised up 39,000 from the first estimate and December revised up 15,000 from the second estimate. The increase in private payrolls was 287,000 with government employment rising 26,000. Employment in the goods sector increased 100,000. The only significant decline came in the service producing information sector, declining 12,000 and has seen three consecutive months of declining employment.

As in the past most of the employment growth was in the service sector continuing a shift in the structure of the economy that has been on-going for many years. Manufacturing remains relatively flat, well below levels of a decade ago. The more volatile mining and construction sector both improved.

Average weekly hours ticked up from 34.4. to 34.5 and average hourly earnings barely changed, rising from $26.71 to $26.75. The increase in average hours implies that workers paychecks increased in the quarter. Average hourly earnings are up 2.6% year over year and the CPI up 2.1% from a year ago (January to January in the case of the CPI).

The household survey release reveals a 806,000 increase in the labor force, 785,000 of that from employment and 22,000 more unemployed, leading to almost no change in the 4.1% unemployment rate. Those not in the labor force declined by 653,000. The employment population ratio increased to 60.4%, moving up from historic lows.

The strong job growth most likely reflects business optimism because of the tax cuts and regulation role backs. In additional, we have entered a period in which most of the worlds developed economies are growing in sync. The new Fed Chairman Jerome Powell has signaled the he is open to increasing interest rates several time this year. The very strong labor market gives him cover for that view but the modest rise in hourly earnings is a factor that will have to be considered as well.

By Thomas Cooley and Peter Rupert

The labor market added  200,000 jobs in January as reported by the BLS. Over the month revisions showed an upward revision in December of 12,000 (148,000 to 160,000) and lower for November (252,000 to 216,000). The private sector added 196,000. The gains were widespread, with only small declines in a few sectors: Nondurable goods down 3,000 and Information jobs in the services sector were down 6,000.

The strongest employment growth was in the service sector but there were also gains in construction and in the volatile mining sector driven by higher oil prices.

Although average hourly earnings rose from $26.65 to $26.74, average weekly pay fell from $919.43 to $917.18 due to weekly hours falling from 34.5 to 34.3. The work week may have contracted because of weather in January so it remains to be seen if there is increasing wage pressure  in the labor market.

The household survey showed little changes, if any, in most of the categories. The unemployment rate nudged up from 4.09% to 4.15%. The employment to population ratio held at 60.1% and the labor force participation rate remained at 62.7%. Both of these have been stable for the past several months.

Looking more closely at the labor force participation rate reveals some interesting trends for various groups. While the LFP rate for women had been climbing over time, it peaked in the early 2,000’s and has been declining since, although it has remained stable over the past couple of years. The long decline in male LFP has also slowed of late and is hovering around 69%. The only real increases over the past decade or so was in those 55 years and older. The decline of teens from 50% to about 35% is one of the more remarkable changes. Another large decline is seen for those with only a high school degree. Their labor force participation rate has fallen from about 65% to 57% over the past two decades. However, the LFP rate of those with less than a high school degree has remained roughly constant over the past couple of decades.

The BLS released productivity numbers for January on February 1. Output per hour in the nonfarm business sector fell by 0.1% with output rising by 3.2% and hours rising 3.3%. This is one facto keeping wage growth low.