Friday, April 06, 2018

Comments on March Employment Report

by Bill McBride on 4/06/2018 09:59:00 AM

The headline jobs number at 103,000 for March was well below consensus expectations of 175 thousand, and the previously two months were revised down a combined 50 thousand.  Looking at just March, this was a disappointing employment report.

However some of weakness was due to payback from the nice weather in February (as expected in my jobs preview).   Job growth has been solid for the first three months of 2018.

Earlier: March Employment Report: 103,000 Jobs Added, 4.1% Unemployment Rate

In March, the year-over-year employment change was 2.261 million jobs. This has been generally trending down, but is still solid year-over-year growth.

Average Hourly Earnings

Wage growth was about as expected in March, although hourly wages for February were revised down slightly. From the BLS:

"In March, average hourly earnings for all employees on private nonfarm payrolls rose by 8 cents to $26.82. Over the year, average hourly earnings have increased by 71 cents, or 2.7 percent."
Wages CES, Nominal and RealClick on graph for larger image.

This graph is based on “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka "Establishment") monthly employment report. Note: There are also two quarterly sources for earnings data: 1) “Hourly Compensation,” from the BLS’s Productivity and Costs; and 2) the Employment Cost Index which includes wage/salary and benefit compensation.

The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees.  Nominal wage growth was at 2.7% YoY in March.

Wage growth had been trending up, although growth has been moving sideways recently.

Prime (25 to 54 Years Old) Participation

Employment Population Ratio, 25 to 54Since the overall participation rate has declined due to cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old.

In the earlier period the participation rate for this group was trending up as women joined the labor force. Since the early '90s, the participation rate moved more sideways, with a downward drift starting around '00 - and with ups and downs related to the business cycle.

The 25 to 54 participation rate decreased in March at 82.1%, and the 25 to 54 employment population ratio decreased to 79.2%.

The participation rate had been trending down for this group since the late '90s, however, with more younger workers (and fewer 50+ age workers), the prime participation rate might move up some more.

Part Time for Economic Reasons

Part Time WorkersFrom the BLS report:
"The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed at 5.0 million in March. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or because they were unable to find full- time jobs."
The number of persons working part time for economic reasons has been generally trending down, and the number decreased in March. The number working part time for economic reasons suggests a little slack still in the labor market.

These workers are included in the alternate measure of labor underutilization (U-6) that was decreased to 8.0% in March. This is the lowest level for U-6 since last November.

Unemployed over 26 Weeks

Unemployed Over 26 WeeksThis graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 1.322 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 1.397 million in February.

This is the lowest level since October 2007.

This is trending down, but remains a little elevated.

The headline jobs number was disappointing, however the weakness was probably related to payback due to the nice weather in February.  For the first three months of 2018, job growth has been solid.