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By Steven R. Drexel, President and CEO of Cornerstone Staffing Solutions, Inc.

As an Economist and seasoned staffing industry professional, I’m regularly asked to participate in several monthly surveys and discussions that predict key elements of the Bureau of Labor Statistics’ (“BLS”) press releases describing The Employment Situation.  The next release revealing March’s statistics will be out on Friday, April 7th, (typically the first Friday of each month reporting on the previous month’s activity).

The BLS offers many statistics covering weekly, monthly, quarterly, and yearly data and comparisons.  Insofar as I dive deep into the data (national, industry and company), this commentary shares my thoughts and observations directly related to predicting how March will perform compared to the recent past. Cornerstone’s stakeholders and other interested parties may find the following remarks helpful in assisting with business strategies and objectives for the near term.

March’s Employment Highlights

Essentially, I expect that March produced 195,000 net new jobs and an unchanged unemployment rate at 4.7 percent.  March’s indicators suggest that the labor market was strong but not as strong as February.  January and February benefited from an unusually mild winter which may have pulled some of March’s employment growth forward.  The risk of recession is receding and the expansion should continue through 2019.  This expansion can be described as frustratingly slow but remarkably long-running. The cumulative impact of the long-running expansion is growing labor shortages and accelerating wage pressure.  More detailed evidence and statistics follow to support my findings.

What you’ll find in this Commentary:

  • The first two months of 2017 were remarkably strong!
  • Will March’s report follow the trend set in January and February?
  • What’s ahead going into mid-2017 and beyond?

January’s and February’s surprisingly strong results.  January and February featured strong job growth and February in particular featured improving metrics across every dimension. The BLS monthly summary of labor market activity covering February 2017 indicated job growth came well above expectation with 235,000 net new positions created.  This followed January’s surprisingly strong 227,000 increase.  The unemployment rate decreased by one tenth of a point to 4.7 percent even while the labor force participation rate improved, signifying that a good number of previously discouraged workers returned to the labor force.    Moreover, average hourly earnings expanded nicely during February to a cyclical best year-over-year growth rate of 2.8 percent (the best growth rate since mid-2009). Growth was widespread as 63 percent of the industry sectors were improved during February.

March’s report should round out a robust Q1 2017.  I expect Friday’s Employment Situation Report covering March’s activity to indicate that the labor market expanded by 195,000 jobs and the unemployment rate will hold steady at 4.7 percent.  This would be slower growth than what was reported in January and February but still stronger growth than the three- or twelve-month moving average reflecting recent trends.  The weather was unusually mild during January and February which likely boosted employment early in the year.  Conversely, March’s results could be suppressed as this dynamic plays out.   The employment market is still healthy and growing.

Positive employment-related economic indicators related to March’s activity included the following:

  • The Institute for Supply Management’s Manufacturing Employment diffusion sub-index improved during March to 58.9 from 54.2 in February.
  • The Conference Board’s Consumer Confidence Index improved during March and the differential between “jobs plentiful” versus “jobs hard to get” was a net 12.2 during March, up impressively from 7.0 during February.
  • The Manpower Employment Outlook Survey indicated that U.S. hiring plans improved modestly during the second quarter.
  • Regional Federal Reserve Surveys with employment and average workweek sub-indexes that improved during March included the following:
    • Kansas City Fed Manufacturing Survey;
    • Richmond Fed Manufacturing Survey;
    • Richmond Fed Services Survey;
    • Texas Manufacturing Outlook Survey;
    • Texas Service Sector Outlook Survey;
    • NY Empire State Manufacturing Survey; and
    • Philadelphia Fed Manufacturing Business Outlook Survey.
  • The private employment surveys that I participate in continued to suggest growth during March at a modestly improved pace.

Employment indicators that were flat or neutral with respect to March employment included the following:

  • Initial Jobless Claims and Continuing Jobless Claims revealed mixed results during March. Initial Claims were weaker while Continuing Claims improved. Both metrics have been on a long term favorable trend but recent results suggest that March employment growth may be softer than recent months
  • The National Federation of Independent Business Survey indicated a continuing high degree of optimism, but the plans to increase the employment component softened during this March survey.
  • Regional Federal Reserve Surveys with employment and average workweek sub-indexes that deteriorated during March included only the Kansas City Fed Manufacturing Survey.
  • The Institute for Supply Management’s New York City Employment diffusion sub-index improved during March to 47.7 from 43.2 in February. However, a diffusion index with a value below 50 indicates contraction.
  • The Wall Street Journal’s March Economic Survey of 72 leading economists forecast of employment growth for 2017 improved during March but remained below 200,000 positons suggesting that March’s rate of growth will slow compared to January and February.
  • The American Staffing Association’s Monthly Index was modestly down during March compared to February with respect to month-over-month growth.

Expectations for Q2 2017 and beyond. The expansion is aging but consumer and business optimism remains high and corporate profits are improving.   Industrial production, retail sales, housing and fixed investment are improving.  The equity markets are remarkably strong.  Hence, the economy is on track to produce stronger GDP growth during full-year 2017.  The labor markets remain healthy and improving. Wage growth is accelerating.  The average workweek has room to improve as does the labor force participation rate suggesting that there is still capacity for further expansion despite low unemployment numbers. And yet, as the expansion ages, there is a natural limit to the rates of growth.  Expect jobs growth during 2017 to average about 190,000 positions per month while the unemployment rate trends slightly down during the next three years settling at around 4.4 percent by year-end 2019.

I invite you to share this commentary with your colleagues and professional network. Please call me to discuss further or ask any questions.

 

 


One Response to “Employment Commentary for March 2017”

  1. trivago

    The Wall Street Journal s March Economic Survey of 72 leading economists forecast of employment growth for 2017 improved during March but remained below 200,000 positons suggesting that March s rate of growth will slow compared to January and February.

    Reply

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