U.S. adds 215k to payrolls in March. Solid job growth continues to draw people back into the workforce
- Non-farm payrolls rose by 215k in March, slightly above the consensus call for 205k. Private sector hiring expanded by 195k, also ahead of expectations for 190k.
- The unemployment rate rose to 5.0%, but for all the right reasons. Household survey employment rose 246k in the month, but came in below labor force growth of 396k. The labor force participation rate rose to 63.0% of working age adults, the highest in two years.
- By sector, goods-producing employment fell by 4k, as manufacturing shed 29k and mining shed 12k, but construction compensated by adding 37k. Private services-producing added 199k, while government kicked in another 20k, mostly at the local level.
- Average hourly and weekly earnings both rose 0.3% month-over-month. On a year-over-year basis, hourly earnings accelerated to 2.3% from 2.2% last month.
- Revisions were basically inconsequential for a change, subtracting just 1k from payrolls. February's tally was revised up to 245k (from 242k), while January's was revised down (to 168k from 172k).
- Overall, this was a very good jobs report. Beyond the headline number, the big question in this report was whether the labor force could continue its rapid growth – and it did. The rise in the labor force participation rate over the past six months has been truly astounding – the strongest in over two decades, suggesting that the job market is finally pulling discouraged workers off the sidelines. Increasing labor force participation may not stall the Fed from raising rates, but it will ensure the rate of increase is very gradual, as Chair Yellen has suggested.
- It is the other side of the Fed's mandate – inflation – that bears watching. On this front, the modest acceleration in wage growth in March is encouraging. While wage growth may not be as strong as some would like, there are structural factors at play. An aging population tends to reduce wage growth as workers at the top end of the pay scale leave the labor market and are replaced by newer workers at the lower end. But even more, a relatively low rate of labor productivity is also weighing on earnings. Given the tracking for real GDP growth around 1.0% and aggregate hours growth of 1.8%, productivity declined in the first quarter and is tracking close to zero over the past year.
James Marple, Senior Economist
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