HFF Analysis of the March 2018 BLS Employment Report

Monday, April 9, 2018

HFF is pleased to report on the latest employment expansion statistics from March 2018. Our research team analyzes trends and data to give readers a better view into the current state of the economy and how employment is being affected.

Employment Expansion

The U.S. added a lower-than-expected 103,000 jobs in March. Figures were revised upward to 326,000 in February and downward to 176,000 in January, a net downward revision of 50,000.

Counter to economists’ predictions, average monthly job growth in the first quarter of 2018 outpaced that of the first quarter of 2017 by about 20,000 jobs. Payroll creation has averaged about 200,000 since October 2010, marking the 90th month of consecutive growth. The period of monthly gains is about three years longer than the prior longest streak from 1986 to 1990.

The unemployment rate remained unchanged for the sixth straight month at 4.1 percent, the lowest level since December 2000. The Fed’s long-term projection for the unemployment rate is currently between 4.2 percent and 4.8 percent. Wage growth increased to 2.7 percent, and economists expect that tax cuts and increased government spending should further bolster hiring and wages in 2018.

Average Monthly Payroll Creation Slowing

The current expansion cycle similar to the cycle from 1991 to 2000 and greater than the 2004 to 2007 expansionary period, but only after a significantly delayed recapture of the nation’s previous employment peak.

Attractive Job Growth Cooling

The U.S. created 2.18 million jobs in 2017. The last six years’ job growth is on par with the expansionary period from 1992 to 1995.

In 2017, the U.S. created 2.18 million jobs. But nearly 40 percent of private-sector job gains came from construction, manufacturing, retailers, hotels, restaurants and temporary help agencies, all typically low-paying sectors.  Professional Business Services, the industry sector most closely aligned with office using employment, experienced expansion of 502,000 jobs in the year ending March 2018.

Fortunately, Temporary Staffing only accounted for 109,000 (approximately 22 percent) of these positions. Temporary Staffing is slowing, however, implying hesitance in hiring the lowest-cost employees companies can find in tentative expansions.

Education and Health Services, which has performed well throughout the downturn being a recession-resistant industry, expanded by 443,000 jobs in the year ending March 2018. Construction added 228,000 in the year ending March 2018.

Unemployment Rate

The Underemployment Rate augments the Unemployment Rate to include anyone marginally attached to the Labor Force that is either not employed or employed only part time. Fortunately, the Underemployment Rate has been descending from a recent high of just over 17 percent; however, the spread between the two rates is near an all-time high and shows no sign of rapid compression. The Unemployment Rate remained unchanged for the sixth month in a row at 4.1 percent in March, the lowest level since December 2000. The Underemployment Rate came in at eight percent in March, a 20-basis point decrease from the prior month.

Wage Growth

As the labor force approaches “full employment,” much attention has been cast to wage growth. The past three recessions were preceded by a period of FOMC tightening. The Average hourly earnings growth exceeded four percent in each of these periods as overall economic activity became reflected in strong wage growth.

The current year-over-year percent wage growth registered at about 2.7 percent, which is 10 bps above last month’s figure.

Sources: HFF Research, Bureau of Labor Statistics, Department of Labor, Bloomberg

Prepared by HFF Research Analysts Aziza RehmatullaMorgan Allen and Jimmy Hinton

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