There was a lot of important information on the U.S. economy released this week, but the biggest data point is without a doubt the latest monthly job report from the Bureau of Labor Statistics (BLS) out this morning. Indeed, total nonfarm employment in America rose by 103K payrolls in March, the smallest monthly gain in half a year and significantly worse than the 175K increase economists expected. However, four of the prior six March job reports have missed expectations by 80K or more payrolls, and this was still the 90th consecutive month of job growth in America. More importantly, payroll gains have averaged +202K during the first quarter of 2018, higher than the 2017 average (+182K) and comfortably above Federal Reserve officials’ estimates for what is needed to keep up with U.S. population growth.
As for joblessness in America, the official unemployment rate (U-3) held at 4.1 percent in March, while the underemployment rate (U-6) fell to 8.0 percent, both of which are at the best levels of the current business cycle. Elsewhere, the labor force participation rate slid to 62.9 percent last month, as a growing number of Baby Boomers continue to exit the workforce (retire). With respect to wage growth, average hourly earnings increased by 0.3 percent in March, an expected improvement from February even as hours worked remained elevated due to capacity constraints. That is likely a reflection of the tightening labor market, as is the big increase in the percentage of job quitters seen last month. Further, aggregate income is up 5.2 percent over the past twelve months, the strongest pace of annual growth since early 2015. Altogether, today’s headline payrolls gain might have disappointed forecasts, but it was still about as good as one should expect this late in the business cycle, and likely nowhere near weak enough to derail the Federal Reserve’s plans to continue raising interest rates this year.
Sources: Econoday, U.S. DoL, Twitter, Bloomberg, FRBSLPost author: Charles Couch