Jobs data zigs when observers expected it to zag

Jobs data zigs when observers expected it to zag
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Payroll employment rose by an almost imperceptible 20,000 jobs in February. There were several transitory factors that depressed the data:

  • Government workers gave up the part-time jobs they had taken to make ends meet;
  • new government hires were delayed;
  • unusually bad winter weather took a toll on construction; and
  • teacher strikes hit state and local government employment.
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Teacher strikes have been on the rise as their pay has lagged even more than overall pay packages since the crisis. Real estate tax revenues were hit hard by the housing bust, which is the primary funding source for public education.

Manufacturing employment weakened, which is likely to persist given the weakness we have seen in manufacturing surveys since the start of the year. Tariffs, weak growth abroad and tight margins are the primary reasons. General Motors has started to close car plants as consumers continue to favor SUVs.

Wages looked better with gains of 3.4 percent from a year ago, up one-tenth of one percent from the
high in December, but growth remains uneven. Low-wage workers are finally earning more.

The middle class is still wanting. The “trickle up” that we usually see when entry-level wages rise is not occurring. Some large employers have raised the wages of entry-level workers at the expense of managers.

Another caveat is that the number of hours worked in a week fell during February. This limited the overall increase in take-home pay associated with higher hourly wages.

Separately, job gains were dominated by higher-paid workers in professional services, which include consultants, architects and computer programmers. That composition of job gains provided an extra lift to wage growth in February but could dissipate in months to come.

The unemployment rate fell to 3.8 percent, down 0.2 percent from January. Government workers who were classified as temporarily unemployed returned to work. Participation in the labor force held at the elevated level we saw in January. Young, minority women, ages 25-34, continued to drive the rebound in participation.

White men with less than a high school diploma are still lagging, but the reasons they are staying out of the labor force show signs of hope. They are now opting to care for their families and go back to school instead of retiring or taking disability.

This is a big shift from the years of the Great Recession and its aftermath. It could mean more participation by those workers and mothers of young children.

The headline on the payroll jobs report overstates weakness in the labor market, but job gains are expected to slow in 2019 relative to 2018.

Overall growth is slowing while some employers complain they can no longer find qualified workers to fill the jobs that they have. There is still an unusually large pool of applicants who can’t pass drug tests, most notably in trucking and on factory floors.

Diane Swonk is the chief economist for Grant Thornton.