January jobs report a boon amid all the chaos
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Today’s Department of Labor (DOL) January report card came in with strong numbers. There was a net gain of 227,000 jobs in January, quite an improvement over December’s 157,000 number and the largest gain since September 2016.

Even so, the headline unemployment rate still moved up just a tad to 4.8 percent, indicating that more of the work-age population was now looking for work.

By sector, the largest employment gains were found in retail trade, with 46,000; construction, with 33,000; financial activities, with 32,000; and 32,000 in health care and social assistance.

There was hardly any change in manufacturing and mining. Retail sales, homebuilding, banking, and healthcare were hot. Here is more evidence that consumer spending is driving the economy.

The good news was foreshadowed the day before when the National Federation of Independent Business announced a surge in hiring for its members, their best reading since September 2015.

Remember, the small business sector forms the bedrock of the economy, and of course, this was reflected in the DOL numbers.

It should be noted that the nation’s strong employment growth occurred in the face of a strong dollar that penalizes exports, and uncertainties associated with Brexit, elections pending in France and Germany, and lots of shaking going on in The White House. In spite of all this, optimism still prevailed.

A closer look at the DOL report tells us once again that higher educational attainment still matters a lot, even in a low unemployment rate economy.

The unemployment rate for labor force members with a bachelor degree or more now stands at a vanishingly small 2.5 percent, which is about as low as we will see. No wonder employers are scrapping so to find experienced, college educated workers.

The rate for those with a high school diploma is 5.3 percent, and the unemployment rate for workers with less than a high school diploma is 7.7 percent. If you have family members in high school, show them these numbers and urge them to stay the course.

Average wages moved up slightly, giving a 2.5 percent increase for the last 12 months, compared with 2.0 percent a year ago.

But given the growth of job openings in the economy, which now stand at 5.5 million, and a tight labor market, we should see even higher wage increases in the year ahead.

Today, the ratio of job openings to the number of unemployed stands at 1.3, meaning 1.3 people looking for every job opening. In July 2009, at the bottom of the Great Recession, the ratio stood at 6.6.

Yes, labor markets are tight, and President Trump has promised to create more jobs and to bring back jobs to America. All this suggests that we will see higher overall inflation, which raises expectations for higher interest rates.

We know that one observation cannot define a trend, but the January labor situation report surely provides a basis for optimism about the prospects for 2017’s first quarter

Bruce Yandle is a distinguished adjunct professor of economics with the Mercatus Center at George Mason University and dean emeritus of the Clemson University College of Business & Behavioral Science. His latest Economic Situation report can be found at Mercatus.org.


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