By Steven R. Drexel, President and CEO of Cornerstone Staffing Solutions, Inc.
On Friday March 10th, the Bureau of Labor Statistics (“BLS”) released its monthly summary of labor market activity covering February 2017. The consensus expectation called for a second consecutive month of strong growth compared to recent months which had averaged 185,000 net new jobs. The official report indicated that February’s job growth matched January’s remarkably strong performance with 235,000 net new positions. This continues a surprising and impressive start to 2017. Another positive data point was the observation that the labor force participation rate improved to 63.0 percent indicating that previously discouraged individuals, that had given up searching, more optimistically reentered the labor force during February. Despite the notion that the labor force expanded, the unemployment rate decreased by one tenth to 4.7 percent. Further, the broadest measure of unemployment that includes those marginally attached and working part time for economic reasons decreased by two tenths of a point to 9.2 percent. Moreover, average hourly earnings expanded nicely during February to a cyclical best year-over-year growth rate of 2.8 percent. Additionally, the industry sector metrics indicated that a stronger majority of the industries grew during February as 63.0 percent expanded or were unchanged compared to 58.0 percent during January. Notable increases in employment by industry segment included construction (+58k), manufacturing (+28k) the dependable health care and social services sector (+32.5k), leisure and hospitality (+26k), professional and business services (+37k), and despite the federal hiring freeze, government (+8k). Noteworthy declining industry sectors included retail trade (-26k) along with motor vehicles and parts (-3.5k). One key indicator that did not improve and remains elevated for this point in an economic expansion in the average duration of unemployment which stands at 25.1 weeks; a measure that was in the 16 week range during the peak of the previous expansion.
In summary, the Employment Report for February was again solid and surprisingly robust for the second consecutive month. Job growth has been much better than both the trend rate and expectations. Improved labor force participation suggests that better wages and opportunities were available during February. There was much to be encouraged about in February’s report. Overall, the metrics indicate that the labor market is remarkably durable, healthy and improving.
Word on the Street
In the real world of staffing and employment services, optimism still runs high. There are fewer economic headwinds on the horizon that suggest threats to the expansion or slower growth. Comparisons to the same period last year while not hearty, have improved, wage rates continue to expand and direct hire placements remain strong. Job orders remain hard to fill because the labor market continues to tighten, particularly for higher skilled workers, although improved worker optimism gives more candidates the courage to consider new opportunities.
The recent economic data suggests that 2017 will be another year of expansion and at the broadest measure, Gross Domestic Product (GDP) will grow at a faster rate than either 2015 or 2016. Going forward, industrial production, retail sales, consumer/business confidence, and housing are all improving and leading the economy. Manufacturing, as measured by the ISM survey, and industrial production are improving. Corporate profits are improving again this quarter. Employment growth as well as broader economic growth will continue consistent with an aging expansion and a tightening labor market. There is optimism regarding the domestic economy as some of the recent threats to growth subside. Employment growth will average around 200,000 positions during 2017 even as GDP growth improves. Moderate job growth will be sufficient to support a growing labor force, a low unemployment rate and, over time, increasing average hourly earnings. The expansion will continue during 2017 through 2019 growing at better than 2.0 percent but less than 3.0 percent.
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