By Steven R. Drexel, President and CEO of Cornerstone Staffing Solutions, Inc.
On Friday May 5th, the Bureau of Labor Statistics (“BLS”) released its monthly summary of labor market activity covering April 2017. The consensus expectation called for a return to trend growth of around 185,000 compared to the average of the most recent months which had registered 176,000 net new jobs. The official report indicated that April’s job growth exceeded expectations, with a healthy 211,000 net new positions. This was a welcome result given that the growth during March, now believed to have been just 79,000 new jobs, was surprisingly weak. Most observers speculated that March’s results were obscured by weather influences. This speculation rings true and reminds us not to panic or celebrate based on a single, possibly aberrational, survey. The strong growth during April also eased concern created with the recent preliminary 1st quarter of 2017 Gross Domestic Product (GDP) reading which was a very puny 0.7 percent.
Other metrics included in the monthly BLS report were mostly positive. The official unemployment rate improved by one tenth of a point to a remarkably low 4.4 percent. Moreover, the broadest measure of unemployment, that includes those marginally attached and working part time for economic reasons, decreased by three-tenths of a point to 8.6 percent. These level of the official rate and the movement in the broader unemployment measure are unequivocally impressive although somewhat muted by the fact that the labor force participation rate deteriorated slightly to 62.9 percent suggesting that the market could be still stronger. The labor force participation rate for prime-age workers (25 – 54 years-old) was flat at 81.7%. Seventy-eight point six percent of prime-age workers are employed, a cyclical high but less than the 80.3 peak of the previous expansion in January 2007. The median duration of unemployment was 10.2 weeks, also close to a cyclical low but higher than the 7.5 week median that was the low point of the last expansion during June of 2006. The year-over-year growth in average hourly earnings remained soft during April at 2.5 percent another indication of slack in the employment market despite a very low unemployment rate and strong jobs growth.
The industry sector metrics indicated that a broader majority of the industries grew during April as 60.2 percent expanded or were unchanged compared to 58.8 percent during April. Prominent increases in employment by industry segment included the following:
- Leisure and hospitality (+55k) – not often the fastest growing sector;
- Professional and business services (+39k);
- Health care and social services sector (+36.8.k) – always robust;
- Financial activities (+19k);
- Government (+15k) – despite the federal hiring freeze;
- Mining and logging (+10k) – long suffering but recently recovering;
- Nondurable goods (+9k);
- Wholesale trade (+8.2k);
- Retail trade (+6.3k) – despite online migration;
- Manufacturing (+6k) – despite well documented long-term trends;
- Construction (+5k);
- Transportation and warehousing (+3.5k); and
- Motor vehicles & parts (+2.8k) – still cruising.
The noteworthy declining industry sectors were Information (-7k) and Durable goods (-3k).
In summary, the Employment Report for April was strong and reassuring. Job growth has been resiliently north of 200,000 positions in three of the four reporting months so far this year and the unemployment rate now at an
impressively low 4.4 percent, has improved for three months running. The metrics are beating expectation which were suppressed because analysts believed the rate of employment growth had peaked due the cumulative effect of many
months of sequential growth. This expansion, at almost eight years in duration (compared to an average of five or six years) is old – but quite remarkably, employment is growing at the same rate as last year. Moreover, other labor force
indicators like initial unemployment claims, layoff announcements, regional Federal Reserve reports, confidence surveys and purchasing manager surveys confirm that the labor market is remarkably durable, healthy and continuing to
Word on the street
In the real world of staffing and employment services, recruiting is the biggest challenge given the shortage of qualified workers across the skill spectrum. Comparisons to the same period last year have fallen to single digit ranges. Wage
rates continue to improve, and direct hire placements remain stalwart. Job orders are plentiful but fill ratios are deteriorating, although improved worker optimism gives more candidates the courage to consider new opportunities.
The recent economic data indicates that GDP will continue to expand during 2017 and 2018 at a better than 2.0 percent but less than 3.0 percent annual rate. While modest, this will be better compared to recent years. Improving drivers of continued economic growth include international expansion, an improving manufacturing sector, consumer/business confidence, housing and corporate profits. Employment growth will continue consistent with an aging expansion and a
tightening labor market, averaging around 185,000 positions during 2017. This moderate job growth will be sufficient to support a growing labor force, a low unemployment rate and, over time, increasing average hourly earnings.
Please feel free to contact me if you have any questions or comments.