March jobs report exceeds expectations

No, it’s not an April Fools joke. The March jobs report continues to show strong job growth, over 200,ooo per month, despite economic headwinds around the world.

Steve Benen has the March jobs report. Hot streak continues for American job market:

The Bureau of Labor Statistics reported this morning that the U.S. economy added 215,000 jobs in March, exceeding projections. The overall unemployment rate inched up a bit to 5.0%, though we’ve been at or below this level for six consecutive months — conditions we haven’t seen in over eight years.

As for the revisions: January’s job totals were revised down a little, from 172,000 to 168,000, while February’s totals were also revised up a little, from 242,000 to 245,000. Combined, that’s not much of a change.

Regardless, this is another encouraging jobs report — including a heartening bump in average hourly earnings — that reinforces the belief that the U.S. labor market is resilient and healthy. Indeed, the overall labor force has grown by over 1.9 million workers since November — more Americans are entering the job market — which is the strongest totals we’ve seen in 16 years.

Over the last 12 months, the overall economy has created 2.8 million new jobs, which is a strong number. What’s more, March was the 66th consecutive month of positive job growth — the best stretch since 1939 — and the 73rd consecutive month in which we’ve seen private-sector job growth, which is the longest on record.

Here’s another chart, this one showing monthly job losses/gains in just the private sector since the start of the Great Recession.

Economist Jared Bernstein adds more analysis. Jobs Report: Another solid month, LFPR on the rise, but manufacturing hit by the strong $;

In yet another in a series of solid monthly reports on the status of the US labor market, payrolls rose 215,000 last month and the unemployment rate ticked up slightly, but for a good reason: more people entered the labor force looking for work. Wage growth remains subdued, up 2.3% over the past year. That’s a bit faster than earlier in the recovery, but still reflecting the fact that while the job market is clearly on a reliable, tightening path, some slack remains and many workers still lack the bargaining power they’d have at full employment.

[T]he labor force participation rate (LFPR) ticked up to 63% last month, back to where it was in early 2014, and half a point higher than its recent trough, representing about 800,000 more people in the job market. Especially given the fact that unemployment’s stayed nice and low as these folks have joined the fray, this is, as noted, a positive development.

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Despite some negative headwinds, including volatile financial markets, weakening GDP growth, slower growth abroad, and the strong dollar hurting our exports, we’re still cruising along with employers reliably adding 200K+ jobs per month.

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With consistent job growth of this magnitude, we should hope to pull more labor market sideliners back into the game, and that may be occurring as per the recent uptick in the LFPR shown below. This critical metric has far from recovered off of its recessionary lows, but since the LFPR reflects demographic change–more retirees will lower it in a way that says more about aging boomers like myself than labor demand–we shouldn’t expect to go back to levels that prevailed under a younger age structure. That said, at least some of the loss in the LFPR could and should be recouped[.]

As noted, a blemish in recent jobs reports is the impact of the strong dollar on manufacturing, which shed 29,000 jobs last month and 18,000 in February. When the dollar strengthens relative to the currencies of our trading partners, it makes our exports more expensive to them and their exports to us cheaper, thus exacerbating our trade deficit and hurting export-oriented sectors, like manufacturing.

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Wage growth was 2.3% over the past year, the same pace as in February. That’s a bit off its faster pace towards the end of last year, and is a notable indicator that slack remains in the job market (workers still don’t have the bargaining power they’ve long lacked). The underemployment rate, which adds in the approximately 6 million involuntary part-timers, ticked up slightly to 9.8% and remains highly elevated. My estimate of the underemployment rate commensurate with full employment is 8.5%, so we’ve a ways to go there.

Finally, let’s take a bit of a bird’s-eye view of the US economy and job market. Broadly speaking, we know three things (don’t laugh, three’s pretty good for economics): 1) GDP growth has been on the slow side; we’re almost 7 years into an economic expansion and we still haven’t closed the output gap (i.e., the gap between real GDP and where real GDP would be if labor and capital were fully utilized) or achieved truly full employment, 2) job growth has been consistently solid, and 3) therefore, productivity growth–the growth of output per hour–has been decidedly weak.

This is actually simple math, because job growth = GDP growth – productivity growth (technically, it’s “total hours worked” growth left of the equals sign, but that doesn’t affect the bird’s eye analysis). In fact, economists of all stripes would agree that productivity growth, currently running at trend levels below 1 percent, is our biggest problem right now, though yours truly would add “the absence of full employment” to the top of that list. And, importantly, they’re related.

Intuitively, if demand/growth/output is on the weak side, yet the pace of the efficiency gains with which we produce that output is also weak, then you need more workers to generate a given level of output–that’s all the little formula above is saying.

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[C]onsider this: low productivity growth may get you more jobs, but it doesn’t help you with job quality. There are critical distributional issues to consider–far too little of the benefits of productivity growth flow to middle and low-wage workers. But unless the productivity pie starts growing faster, it will be even harder to cut bigger slices for working class families.

Simply put, the progressive goal is not simply a greater quantity of jobs; it’s jobs of decent quality.

Importantly, lasting full employment helps with both of those problems. By definition, it implies enough jobs to meet the supply of workers. But when the job market is at full employment, pressure builds to push up labor costs and wages and compensation begin to get a bit of traction, as we’ve begun to see in recent job reports.

At the same time, employers seeking to maintain their profit margins must find new efficiencies and shed sloppy inefficiencies that were affordable in periods of persistent slack, with no pressure from labor costs. I’ve called this the full employment productivity multiplier.

So, steady as she goes. The job market continues to firm up and labor force participation is finally getting what looks like a nice bump. That said, the strong dollar is taking its toll of factory employment and underemployment remains much too high. There’s a lot more room for wages to pick up as well, which is what it will take for working people to feel the benefits of overall growth.