Labor Markets Thawing Out, Positive Feedbacks Are Engaging
- U.S. Payroll Employment increased by 192,000 jobs in March. January and February were revised up.
- The Unemployment Rate for March was unchanged at 6.7 percent, with strong gains in the labor force.
- Average Hourly earnings for March were up a tame 2.1 percent over the previous 12 months.
Labor data is now added to the growing list of indicators that point to a spring thaw for the U.S. economy after a brutal winter. Earlier this week we saw both the ISM Manufacturing and Non-Manufacturing Indexes for March solidly in expansion territory. Auto sales for March snapped back to a 16.4 million unit rate. U.S. payroll employment increased by 192,000 jobs in March. January payroll gains were revised up to 144,000, and February was revised up to 197,000. Moderate first quarter job growth is supportive of second quarter consumer spending and home sales. Even with the winter chill, February and March payroll gains were above the 190,000 jobs per month average increase for 2013.
The unemployment rate did its usual confounding thing in March and remained unchanged at 6.7 percent. The household employment series, which feeds into the unemployment rate, was strong in March, gaining 476,000 jobs, but the labor force has also shown strong gains recently. In March, the civilian labor force increased by 503,000 workers. In the five months since November, the labor force has increased by an average of 320,000 workers per month, substantially above the -86,000 average monthly declines over the 10 months prior to last November.
Now that the Federal Reserve has backed away from the concept of an unemployment rate threshold for the fed funds rate, strange patterns in the labor force data are more of a curiosity than a potential policy mover. Still, if the recent pattern persists, the unemployment rate may stall out at around 6.7 percent. More likely is a moderation in labor force growth that allows the unemployment rate to fall gradually. Average hourly earnings edged down by 1 cent in March to $24.30. This will be reversed soon. Over the last year average hourly earnings are up a tame 2.1 percent, exerting little inflationary pressure. The average workweek increased by 0.2 hours in March. Combined with a solid payroll gains, the increase in the workweek implies solid production numbers for the month.
Job growth was widespread across the private sector. The construction industry added 19,000 jobs in March, indicative of increasing building activity in the months ahead. Manufacturing employment dipped slightly by 1,000 jobs, weighed down by losses in fabricated metals and food manufacturing. Retail trade added 21,300 jobs in March. Transportation and warehousing added 7,900 jobs in March. Financial services added a scant 1,000 jobs for the month. Professional and business services employment was strong, increasing by 57,000. Education and health gains were solid at 34,000. Leisure and hospitality added 29,000 jobs. Government employment was a goose egg, adding no net jobs in March.
Market Reaction: U.S. equity markets are holding onto yesterday’s gains. The 10-Year T-bond yield is down to 2.75 percent. NYMEX crude is up to $101.23/barrel. Natural gas futures are down to $4.44/mmbtu.
For a PDF version of this Comerica Economic Alert click here: Employment 04-04-14.