March Jobs Report: A Mixed Bag

April 7th, 2017

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The U.S. job market showed mixed results in March, with nonfarm payroll employment growing by 98,000. This is down from the revised growth of 219,000 in February and much below consensus expectations of 175,000 for the month.

However, the U.S. unemployment rate dropped from 4.7 percent in February to 4.5 percent in March. The labor force participation rate remained constant, at 63 percent, while average hourly earnings increased 2.7 percent over the last year. This is lower than the 2.8 percent year-over-year growth last month but remains above the long-term average growth over the past few years.

Following are the top takeaways from the report:

Employment growth lower. The most surprising part of the March jobs report was the lackluster topline employment growth figure of just 98,000 in the last month. Analysts expected some slowing in jobs, but this represents a significant slowdown from February’s job growth of 219,000.

Employment

Some of this slowdown can be explained by looking at growth in employment sectors. Construction employment only grew by 6,000 jobs in March. Construction employment had been growing strongly since last summer and in February grew by 58,000 jobs. Labor shortages in Construction continue to impede growth in this sector.

Retail Trade continues to shed jobs, dropping by 30,000 in March. This sector has declined by 89,000 jobs since it hit a high in October 2016.

Health Care employment added 14,000 jobs in March, which is lower than the average addition of 20,000 jobs per month in the first three months of 2017, and the average monthly gain of 32,000 jobs in 2016.

Some brighter spots in employment sectors include Mining, which added 11,000 jobs in March and has increased 35,000 since the low point in October 2016.  Professional and Business Services jobs increased 56,000 in March, which is consistent with average monthly gains over the past 12 months. And the Financial Activities sector expanded by 9,000 jobs in March, increasing by 178,000 over the past 12 months.

Unemployment drops further. The unemployment rate decreased 0.2 percent in March, to 4.5 percent. This is down from the 4.7 percent unemployment rate in February and lower than the consensus forecast of 4.7 percent. This reflects a tightening labor market that is starting to show signs of labor shortages in some sectors and in some geographic locations throughout the U.S.

 

Unemployment

Labor force participation freeze. The percent of the population that is actively connected to the labor force remained constant in March, at 63 percent.  This is somewhat surprising, given the drop in the unemployment rate.

Wage growth continues. Average hourly earnings increased by 0.2 percent in the last month, with the year-over-year change coming in at 2.7 percent. Average earnings are now at $26.14 per hour in the U.S., which is up 5 cents over the previous month. This growth is a little slower than in February but is still higher than the long-term average wage growth over the past several years.

The bottom line. The March employment report reflects a labor force that grew much more slowly than recent trends. This can be explained, in part, to a tightening in the availability of labor, reflected in the low and dropping unemployment rate. Wage growth, while higher than the multi-year trend, is still lower than levels before the 2009 recession. Because of this, the job market did not bring people off the sidelines in significant numbers in March.

The division of Economics and Public Policy at Zions Bank informs and educates employees, clients and the community-at-large by providing insight and analysis on issues related to local, national and global economic trends as well as federal banking policies. The primary goal of the Economic and Public Policy team is to help individuals and businesses understand important issues that can impact their daily financial decisions. For more information and analysis, please visit www.zionsbank.com/economy.

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