Friday, April 05, 2019

Comments on March Employment Report

by Calculated Risk on 4/05/2019 10:31:00 AM

The headline jobs number at 196 thousand for March was above consensus expectations of 169 thousand, and the previous two months were revised up 14 thousand, combined. The unemployment rate was unchanged at 3.8%.  Overall this was a solid report.

Earlier: March Employment Report: 196,000 Jobs Added, 3.8% Unemployment Rate

In March, the year-over-year employment change was 2.537 million jobs. That is solid year-over-year growth.

Average Hourly Earnings

Wage growth was slightly below expectations. From the BLS:

"In March, average hourly earnings for all employees on private nonfarm payrolls rose by 4 cents to $27.70, following a 10-cent gain in February. Over the past 12 months, average hourly earnings have increased by 3.2 percent."
Wages CES, Nominal and RealThis 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 3.2% YoY in March.

Wage growth has generally been trending up.

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 was unchanged in March at 82.5%, and the 25 to 54 employment population ratio was decreased to 79.8%.

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 4.5 million in March. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs."
The number of persons working part time for economic reasons increased in March to 4.499 million from 4.310 million in February.   The number of persons working part time for economic reason has been generally trending down.

These workers are included in the alternate measure of labor underutilization (U-6) that was unchanged at 7.3% in March.

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 1.305 million workers who have been unemployed for more than 26 weeks and still want a job. This was up slightly from 1.271 million in February.

Summary:

The headline jobs number was above expectations, and the previous two months were revised up slightly.  The headline unemployment rate was unchanged at 3.8%.

This was a solid jobs report, and was probably boosted by some bounce back from the poor weather in February.   The economy added 541 thousand jobs in Q1, down from 683 thousand jobs in Q1 2018.   So it appears job growth has slowed somewhat, but is still solid.

This was strong enough to alleviate recession fears (no worries!), but not too strong to change the Fed's view of the economy (stay on hold).

Note that sometime soon the overall participation rate will start declining again due to demographic factors.   The overall participation rate has been moving sideways for several years, as the expansion has offset the demographics factors.