Today’s Job Report Shows Labor Market Continues to Improve

by Bob Stein

The headlines from today’s employment report were okay; my firm expected an increase in the pace of job growth in March, as weather-related problems eased, and that’s exactly what happened. Meanwhile, the unemployment rate remained at 6.7 percent instead of ticking back down to 6.6 percent, as we expected. 

But the details of the report were much better than the headlines and signal re-acceleration in the labor market. Payrolls increased 192,000 in March but a faster 229,000 including upward revisions for prior months. Including revisions, private payrolls gained 239,000. And although the jobless rate did not tick back down, the reason was a 503,000 gain in the labor force.

Civilian employment, an alternative measure of jobs that includes small business start-ups, rose 476,000 in March and is up 2.3 million in the past year, slightly beating the 2.2 million increase in nonfarm payrolls. Historically, when civilian employment grows faster than payrolls, it’s a sign of faster job growth ahead.

In the past year, the labor force is up 1.1 million while the unemployment rate has dropped from 7.5 percent from 6.7 percent. Given recent gains in the labor force, the participation rate finally appears to be leveling off; at 63.2 percent it’s the highest in six months and down only slightly from 63.3 percent in March 2013.

The worst news in today’s report was that after increasing 0.4 percent in February, average hourly earnings were unchanged in March. However, after dipping only 0.1 percent in February, total hours worked surged 0.7 percent in March. So, despite flat hourly earnings, total cash earnings increased 0.7 percent in March, the fastest gain in four months. Total cash earnings are up 4 percent versus a year ago, providing plenty of fuel for consumer spending.

Part-time employment increased 414,000 in March, helping boost the more expansive U-6 definition of the unemployment rate to 12.7 percent from 12.6 percent. But the increase in part-timers follows a drop of 1.1 million in the prior seven months. In the past year, part-time employment is up only 180,000, which means it’s been a shrinking share of the workforce.

As we always remind our readers, the labor market could and would be doing better with a better set of policies. But it’s still improving. In the past year nonfarm payrolls have grown at an average monthly rate of 187,000 while civilian employment is up 196,000 per month. We expect continued solid jobs gains in the months ahead. 

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