April Jobs Report
DOW + 55 = 21,006
SPX + 9 = 2399
NAS + 25 = 6100
RUT + 8 = 1396
10 Y – .005 = 2.35%
OIL + .89 = 46.41
Today is a Jobs Report Friday. The economy added 211,000 net new jobs in April. The unemployment rate dropped to 4.4% from 4.5% in March. This was a better than expected report. The consensus estimate was for 190,000 jobs.
The March report was weaker than expected, initially reported at 98,000 jobs, it was revised even lower today – down to just 79,000.
So, the big question heading into this report was whether March was a fluke, was it just a single, off month? And the answer is, yes. So, to smooth out the numbers, we can look at the first four months of the year and the average job growth is 185,000 new jobs per month, right in line with the average for 2016.
So, this was a good report. The reaction on Wall Street was muted, even as the Nasdaq and the S&P 500 closed at record highs. Bonds were flat. The yield curve between two-year notes and 10-year notes flattened to 103 basis points, from 105 basis points before the data.
The U-6 unemployment rate dropped to 8.6% from 8.9%. The U-6 includes unemployed plus underutilized or underemployed workers, people who are working part-time but would like to be working full-time. The U-6 is now at its lowest level since November 2007. The headline rate, the U-3, is at its lowest level in more than a decade and close to the lowest level in 16 years.
The unemployment rate fell by 0.1 percentage points, but this was in part because fewer people were looking for work. The labor participation rate fell slightly to 62.9 percent last month from 63 percent; this indicates that the labor market is not strong enough to pull potential workers off the sidelines.
The labor force participation rate for workers age 25 to 54, the prime working years, rose to 78.6, but still a bit low historically. This means many people have not participated in this jobs recovery. Certainly, demographics are at play. The boomers are retiring. Younger workers may be staying in school longer, rather than being tempted into the workforce.
But it likely includes workers who have been marginalized, out of work so long that it is now difficult to get a job, or scrimping along on part-time work. We’ve seen some increase in labor market fluidity, meaning people leaving one job for another, (median job tenure fell from 2014 to 2016 after rising steadily since 2000).
In recent days, we have seen a couple of real estate reports showing single family home prices still have not recovered from the downturn, meaning that many people are not able to move to change jobs.
Jobs gains were broad, with basically all sectors posting at least a few new jobs. Leisure and hospitality added 55,000 jobs. Employment in professional and business services continued to trend up in April (+39,000). Employment in health care and social assistance increased by 37,000 in April.
Financial activities added 19,000 jobs. Employment in mining rose by 9,000 in April (this sector includes jobs in oil exploration and drilling and support and there were even a few coal mining jobs added) Employment in other major industries, including construction, wholesale trade, transportation and warehousing, information, and government, showed little change over the month.
Manufacturing managed to add 6,000 jobs, nothing to crow about. The retail sector slashed jobs in February and March, cutting 56,000 positions over the two months combined and contributing to fears of a “retail apocalypse.” So, it was a relief to see retailers add jobs in April, albeit only 6,000 of them.
The retail industry has lost as many jobs in the past few months as there are in the entire coal industry. Among the major worker groups, the unemployment rate for adult men declined to 4.0%, adult women 4.1%, teens at 14.7%, Whites, 3.8%, Blacks 7.9%, Asians 3.2%, and Hispanics 5.2%.
The average workweek for all employees on private non-farm payrolls increased by 0.1 hour to 34.4 hours in April. In manufacturing, the workweek edged up by 0.1 hour to 40.7 hours, and overtime edged down by 0.1 hour to 3.2 hours. The average workweek for production and non-supervisory employees on private non-farm payrolls edged up by 0.1 hour to 33.7 hours.
In April, average hourly earnings for all employees on private non-farm payrolls rose by 7 cents to $26.19. Over the year, average hourly earnings have risen by 65 cents, or 2.5 percent. Just enough to keep pace with inflation, meaning real income barely budged.
Employers keep complaining about a shortage of workers, but they don’t seem to be willing to pay enough to attract them. At some point, a tight labor market should result in higher wages but it hasn’t happened yet. In a healthy economy, we would expect to see wages growing at 3.5-4 percent.
Over the past year, the unemployment rate has fallen sharply for those with only a high school degree or those with less, and that trend continued this month. The long-recovery has also led to a decline in the long-term unemployed, and a sharp decline in people working part-time jobs who would prefer full-time work but it hasn’t necessarily lead to an increase in wages.
The Economic Policy Institute published a report yesterday on the Class of 2017, finding young high school graduates on average are still paid less than they were in 2007 (adjusted for inflation), while the average wages of young college graduates have finally surpassed the 2007 level. “Yet the economy of 2007 is a low bar for economic opportunity.
Relative to the full employment economy of the late 1990s and 2000, the shares of young graduates who are unemployed and underemployed, and generally “idled” by the economy (neither working nor in school), are still quite high.” For young high school graduates, the unemployment rate is 16.9 percent (compared with 15.9 percent in 2007 and 12.1 percent in 2000).
You may or may not be surprised to discover that more than 60 percent of all private sector jobs created in this recovery have been in low-paying service industries of the economy. It may be more surprising to know that this share is lower than during the prior two labor market recoveries. This is perhaps the most disappointing development of the current cycle.
In the wake of the financial crisis, job losses were so high that getting people who lost their jobs back into the workforce hasn’t required a good deal of cajoling on the part of employers. Although wages have strengthened over time, it’s been a painfully slow process.
The general lack of business dynamism in this recovery has been well-documented. The Bureau of Labor Statistics, for example, shows that the number of jobs created by new businesses (those less than one year old) has declined from upwards of 4 million in 1994 to 3 million in 2015, partly because of a slow rate of new business formation.
Whether this has been related to a lack of credit availability or an increased regulatory burden (likely both), the fact is that small- and medium-sized businesses (those with less than 500 employees) have not led the pack in hiring throughout much of this expansion, which is quite abnormal. A recent and encouraging development, then, has been the long-awaited emergence of hiring among small employers.
April marked the 79th straight month of job growth, by far the longest such streak on record. The U.S. has added 15 million jobs over that period, nearly 200,000 per month. When the streak began in October 2010, the unemployment rate stood at 9.4 percent, and it would have been higher if government economists counted the millions of Americans who had stopped looking for work; today, the unemployment rate has fallen so far that many economists question how much lower it can go.
Perhaps more remarkable than the recovery’s length has been its resilience. Time and again, one or two weak months of hiring have sparked fears that the recovery was nearing its end; time and again, job growth rebounded. The past two months are a good example: Hiring slowed sharply in March, when employers added just 79,000 jobs, but quickly rebounded in April.
There are still weak spots in the job market, even after six and a half years of growth. Wages are rising, but their recent growth has been disappointing. At this late stage of the recovery, it is reasonable to think wages would be higher.
This might represent a significant shift in how we think about wage growth and wage push inflation. There are signs of trouble in the retail sector, where hiring has been weak. And joblessness remains high among certain groups, such as young black men.
It’s unclear how long the strong job market will last. The current economic recovery, which dates to mid-2009, is already among the longest since World War II. And hiring could slow even if the recovery continues: The Federal Reserve has been raising interest rates to prevent inflation, which could also lead to reduced hiring.
Fed Chair Janet Yellen gave a speech today at her alma mater, Brown University. Her chief point: America needs better policies to encourage more women to work full careers. Sustained careers could help narrow the gender wage gap and boost growth overall. Women working full-time still earn about 17% less than men per week, Yellen said.
Even when comparing men and women in the same job positions with similar backgrounds, the wage gap is 10%. Yellen has a good point. Even though the jobs recovery has been long, it has not yet reached out to everyone.