US job market looks solid 8 years after recession ended

Associated Press

June 1, 2017

WASHINGTON  — Exactly eight years after the Great Recession ended, the U.S. job market has settled into a sweet spot of steadily solid growth.

The 4.4 percent unemployment rate matches a decade low. Many people who had stopped looking for jobs are coming off the sidelines to find them. More part-timers are finding full-time work. About all that's still missing is a broad acceleration in pay.

On Friday, when the government releases the jobs report for May, that pattern is likely to extend itself. The consensus expectation of economists is that the Labor Department will report that employers added 176,000 jobs, according to a survey by FactSet, a data provider. That's right in line with the monthly average of 174,000 over the past three months.

All told, it's evidence of an American economy that is running neither too hot nor too cold, with growth holding at a tepid but far from recessionary 2 percent annual rate. Few economists foresee another downturn looming, in part because the recovery from the recession has been steady but grinding, with little sign of the sort of overheated pressures that normally trigger a recession.

The jobs report will be released at 8:30 a.m. Eastern time.

Separate reports Thursday solidified expectations that job growth for May was healthy. Payroll processor ADP reported that in a private survey of companies, it found that a hefty 253,000 jobs were added in May, mostly among companies with fewer than 500 workers.

Nor are layoffs much of a concern. Weekly applications for unemployment benefits, which tend to reflect the pace of layoffs, averaged a low 238,000 over the past four weeks, according to the Labor Department.

The government's monthly jobs report produces a net gain by estimating how many jobs were created and comparing that figure with how many it estimates were lost.

The unemployment rate is expected to have remained in May at 4.4 percent, a low figure that historically has reflected a healthy job market. If hiring maintains its current pace, it would exceed population growth, and the unemployment rate should eventually fall even further.

Mark Zandi, chief economist at Moody's Analytics, estimates that monthly job growth above 80,000 or so should cause the unemployment rate to fall.

"I think 4 percent unemployment is dead-ahead, and we'll probably go past that," he said.

Still, the jobs report produces several different measures of unemployment, and the broadest gauge might be most critical to watch Friday. This particular measure includes not only the officially unemployed but also part-time workers who would prefer full-time jobs and people who want a job but aren't actively looking for one and so aren't counted as unemployed.

Known as the "U-6" rate, this measure is one of the favorite metrics for Trump administration officials. The U-6 has plunged since January to 8.6 percent in April, a 0.8 point decline.

The decline in that measure is an encouraging sign that jobless people who had given up hope of working are now being hired. If that trend continued in May, a falling U-6 would point to a strengthening economy despite weak growth during the first three months of the year.

But the influx of job seekers can also inflict a drag on pay growth. As more people start seeking jobs, employers begin to have less incentive to raise pay. It's only when employers face a shallow pool of job applicants that they tend to feel compelled to raise pay in hopes of hiring people who fit their needs.

Annual growth in average hourly earnings was a so-so 2.6 percent in April. And whatever meaningful pay raises that exist are going disproportionately to managers and supervisors. For workers who aren't supervisors, average hourly pay has risen just 2.3 percent. In a healthy economy, average pay gains would typically grow roughly 3.5 percent a year.

Of the 211,000 jobs added in April, more than a quarter were in the generally lower-paying leisure and hospitality industry — hotels, restaurants and amusement parks. Health care and social assistance added nearly 37,000 jobs and professional services 39,000.

The Trump administration has designated the pace of hiring for good-paying skilled jobs in construction, manufacturing and mining as among the key categories it monitors for economic health. Those three sectors were relatively weak in April.

The construction sector added just 5,000 jobs in April and 1,000 jobs in March. A rebound could occur in May because construction activity has been improving. The government has reported that housing starts are up 5.3 percent year-to-date, while construction spending has risen 5.8 percent year-to-date.

<<EARLIER: Finding workers in tight labor market

Companies accelerate hiring, adding a robust 253,000 net new jobs, ADP says

WASHINGTON — Companies accelerated their hiring last month, adding a robust 253,000 net new jobs in a sign the labor market remains healthy and the economy is strengthening after a weak winter.

The private-sector job creation figure reported Thursday by payroll firm Automatic Data Processing far exceeded analyst expectations and was well above the downwardly revised 174,000 net new positions added in April.

“Job growth is rip-roaring,” declared Mark Zandi, chief economist at Moody’s Analytics, which assists ADP in preparing its report.

He noted the job creation was nearly three times what was needed to absorb new entrants into the labor force and predicted that, “increasingly, businesses’ number one challenge will be a shortage of labor.”

If that’s correct, wages should start to rise faster as the economic recovery from the Great Recession hits its eighth anniversary this month.

The report is based on an analysis of ADP’s payroll data. It is not the official government estimate, which the Labor Department is to release on Friday, but is watched by economists for signs of what that data will show.

Analysts expect the Labor Department to report that the economy — private and public sectors — added 185,000 net new jobs last month. That would be a solid gain, but down from April’s 211,000 figure.

The unemployment rate is forecast to hold steady at 4.4 percent, the lowest in nearly a decade.

But ADP’s figures can vary widely from the government’s, as they did in March, when they reported much stronger growth, and in April, when they indicated weaker job creation.

ADP’s latest report showed a strong rebound in construction hiring. Companies in that sector increased their payrolls by 37,000 in May after shedding 7,000 net positions the previous month.

Trade, transportation and utilities added 58,000 net new jobs last month, up from just 9,000 in March. Education and health services companies boosted their payrolls by 54,000 after a 38,000 gain the previous month.

But the leisure and hospitality sector shed jobs for the first time in a year. Those companies reduced their payrolls by 11,000 last month after adding 41,000 net new jobs in April.

Federal Reserve monetary policymakers are watching the labor market closely to determine whether the economy is strong enough for another increase in a key short-term interest rate.

Fed officials have indicated they are on track for a small rate hike this month if the labor market continues to show solid growth.

The ADP report pointed in that direction as did the weekly jobless claims figures released Thursday by the Labor Department. Although initial claims for unemployment insurance increased last week to 248,000, the figure remains low and consistent with a healthy labor market.