The Employment Report covering March 2016 activity was released today (April 1, 2016.) Employment gains were right-in line with expectations, increasing by 215,000 seasonally adjusted positons. Less expected was a one tenth increase in the unemployment rate to 5.0 percent. Just to put the unemployment rate in context, it was as low as 4.6 percent during the peak of the last expansion.
Analysts and pundits were pleased to see employment continue to grow at a respectable pace, particularly in light of persistent weakness in foreign markets, a too-strong dollar and falling commodity prices. During 66 months of consecutive jobs growth, the U.S has added over 13 million jobs.
Notably, concern related to the increase in the unemployment rate was dissipated because the increase was caused by a robust increase in the labor force indicating that better opportunities are drawing more job seekers off the sidelines. The increase in job seekers entering the labor force has totaled 2.4 million during the last six months.
Other details in the report include a return of growth in average hourly earnings which are now 2.25 percent above last year. This is a welcome gain because it suggests the job sectors that are growing are not all low-wage positions. Additionally, the percentage of industries that participated in the growth improved from 58.0 percent to 58.4 percent — so a decent percentage and increasing share of industries are joining the expansion. One metric that has been stuck for too long is the average workweek which came in at 34.4 hours which is down from 34.6 during January and as far back as August.
In summary, the Employment Report was encouraging. The economy is continuing to produce a respectable number of jobs. Long discouraged and unemployed workers are rejoining the active job seekers and earnings are starting to grow at a more positive rate. The domestic U.S. Economy is proving itself to be fundamentally strong enough to hold off the effects of global weakness and recession risks are receding. Our growth is not robust but it is remarkably steady and ultimately more sustainable. All signs support the belief that 2016 will be another year of growth at about the same rate as 2015. This will result in the further tightening of the labor market, and soon, a return to full employment. Expect more pronounced labor shortages and growing wage pressure over the course of next twelve to twenty-four months.

Steven R. Drexel

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