HFF Analysis of the April 2018 BLS Employment Report

Friday, May 4, 2018

HFF is pleased to report on the latest employment expansion statistics from April 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 164,000 jobs in April. Figures were revised upward to 135,000 in March and downward to 324,000 in February, which is a net upward revision of 30,000. Payroll creation has averaged about 199,000 since October 2010, marking the 91st month of consecutive growth. The period of monthly gains is about three years longer than the prior longest streak from 1986 to 1990.

Unemployment decreased slightly to 3.9 percent after holding steady at 4.1 percent for six consecutive months. This marks the lowest unemployment level since December 2000. The decline in the Unemployment Rate was, in part, driven by the decreased labor force participation rate. The Fed’s projected Unemployment Rate for the next year is at 3.6 percent.

Average Monthly Payroll Creation Slowing

The current expansion cycle is similar to the one 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.

Looking at the 2.18 million jobs the U.S. created last year, 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 518,000 jobs in the year ending April 2018. 

Fortunately, Temporary Staffing only accounted for 114,000 (approximately 22 percent) of these positions. Temporary Staffing is slowing, 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 431,000 jobs in the year ending April 2018. Construction added 257,000 in the year ending April 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 decreased slightly to 3.9 percent in April after sixth consecutive months at 4.1 percent. It is at its lowest level since December 2000. The Underemployment Rate came in at 7.8 percent in April, 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. Average hourly earnings growth exceeded four percent in each of these periods as overall economic activity became reflected in strong wage growth. 

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

Prepared by HFF Research Analysts Laura Bancroft and Morgan Allen and HFF Managing Director of Research Jimmy Hinton

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