'Steady as she goes': US jobs market remarkably consistent, solid
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The monthly employment reports have had the financial markets on an emotional roller coaster in recent months. After back-to-back robust job gains in January and February, employment barely rose in March. In retrospect, those early-2017 swings were likely related to the weather, as warm weather led to less than the usual number of winter layoffs while a cool March delayed seasonal spring hiring.

The see-saw pattern continued when payroll gains bounced back in April, but a tepid employment gain in May (originally reported as a 138,000 rise) brought out the concerns about a slowing labor market again. Those fears yet again proved unfounded, as the June jobs figure, released today, surged to a 222,000 advance.

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So where do we stand in terms of job growth now? The average employment gain over the last two months is 187,000, while the year-to-date average monthly increase is 180,000, and the 2016 average was 187,000. Similarly, if we limit the picture to private sector payrolls, the two-month average is 173,000, the 2017 year-to-date average is 171,000 and the 2016 average was 170,000.

 

In short, the labor market remains rock solid and is showing no signs of either accelerating or decelerating. Job gains continue at a pace that is well in excess of what is needed to keep up with population growth, which means that over time, the unemployment rate is likely to continue falling (despite today’s modest backup) and the labor market should continue to tighten.

It is easy to lose sight of these broader averages in the excitement of each monthly release, but the consistency of the labor market has been impressive. It has been nearly five years since we had back-to-back monthly payroll advances of less than 150,000 (which, by the way, is far from a weak rate of increase). That is a remarkable string of solid job growth, and judging from today’s report, there is every reason to expect this to continue.

There is also plenty of confirmation that labor demand remains robust and that the labor markets are getting tight. “Help wanted” signs are everywhere, and firms are increasingly complaining that they are unable to find qualified candidates to fill openings. The unemployment rate rose slightly in June, but it remains at a level — 4.4% — that has rarely been seen (that level marked the lowest reading of the 2002-2007 expansion).

The recovery from arguably the worst downturn since the 1930s has been remarkable. Few economists imagined that the jobless rate would fall from a peak of 10 percent to well below 5 percent in less than eight years.

Indeed, perhaps the best news of all for the United States economy and for society broadly is that the tightness of the labor market is providing opportunity for many people who were thought to have been cast aside for good during the downturn.

As the unemployment rate was surging, economists were fearfully discussing the possibility that a large number of people would find themselves subject to a prolonged period of unemployment, which would erode their job skills over time and, in many cases, break their ties to the labor market once and for all.

The recovery has progressed now to the point where firms are growing increasingly desperate for workers and need to consider job candidates who might have been labeled as unemployable a few years ago. In other words, unlike in some other places around the world (look at many countries in Europe, for example), where regulations have sapped the labor market of its vitality and led to permanently high unemployment rates, the U.S. job arena is healthy, dynamic and resilient.

Stephen Stanley is the chief economist for Amherst Pierpont Securities, a broker-dealer providing institutional and middle-market clients with access to fixed-income products.


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