Commentary by Steve Drexel, Cornerstone Staffing Solutions
The Employment Report covering February 2016 activity was released on Friday March 4. The headline gain in employment was a much better than expected, 242,000 jobs while the unemployment rate remained constant at 4.9 percent. Not only was the 242,000 growth notably better than the February consensus, it handily beat January’s unnervingly soft 172k increase and even exceeded the six month average increase by about 2 percent. The February report was encouraging because it demonstrated a degree of buoyancy in the face of global weakness and turbulence in the financial markets (stocks and bonds). February’s rebound eases concerns about the overall economic trajectory and the health of the domestic economy.
Other details in the report include a robust expansion of the labor force as favorable conditions motivated 555,000 (net) individuals to resume a job search. This was evident as the labor force participation rate improved two tenths of a percent to 62.9 percent. Just fewer than 60 percent of the industries reported growth with more strength in services (education and healthcare, for example) and less in hard goods (mining and manufacturing, for example). Average hourly earnings gave back just one tenth of the five tenth gain recorded in January and were 2.2% over last year’s level. The average workweek at 34.4 hours was a touch soft with recent months falling in the range of 34.5 to 34.6 hours.
In summary, the return of stronger jobs growth is very encouraging news. It suggests that the challenges posed by weak international growth which results in a stronger U.S. currency, and an unsteady stock market has not derailed the domestic economy. This supports the belief that 2016 will be another year of slow but steady growth — resulting in the further tightening of the labor market, and soon, a return to solid wage growth. It’s been a very gradual but prolonged recovery since the great recession during 2008 and 2009, and we have not achieved full employment yet, but expect the labor market to return to full employment during the second half of 2016. For employers this means more acute labor shortages and growing wage rates before this time next year.