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Economy in Brief

U.S. Payrolls Show Further Improvement; Unemployment Rate Nudges Higher
by Tom Moeller  April 1, 2016

The job market remained firm during March. Nonfarm payrolls increased 215,000 (2.0% y/y) following a 245,000 February increase, earlier reported a 242,000. A 200,000 increase had been expected in the Action Economics Forecast Survey. During the last three months, payrolls rose at a 1.8% annual rate. The unemployment rate increased to 5.0% following two months at 4.9%. A 4.9% rate had been expected. The overall unemployment rate including marginally attached workers and those working part-time for economic reasons notched up to 9.8%, about where it has been since October. Average hourly earnings rose 0.3% (2.3% y/y) after an unrevised 0.1% dip. A 0.2% increase had been expected.

From the payroll employment survey, the 215,000 increase extended the moderate trend rate of improvement during the economic expansion. Strength last month was again exhibited by the construction sector's 37,000 increase (4.7% y/y), the strongest gain in three months. To the downside, however, were factory sector payrolls which fell 29,000 (-0.2% y/y). The decline reflected widespread negative readings in both the durable and nondurable goods sectors. Also continuing lower were mining sector payrolls. The 12,400 worker decline (-17.1% y/y) continued the trend in place since October 2014.

Hiring in the private service sector continued to power the job market. The 199,000 gain (2.6% y/y) was in line with this year's average, though it was down from the monthly gains in the second half of last year. Retail trade employment increased 47,700 (2.4% y/y) after even stronger growth in the prior two months. Health care payrolls strengthened 44,000 (3.5% y/y) while employment in the leisure & hospitality industry increased a steady 40,000 (3.1% y/y). The professional & business sector added 33,000 workers (3.1% y/y), but that was below the growth logged during most of the economic expansion. Temporary help employment posted a weak 4,000 increase (1.9% y/y) following two months of decline. Employment in the financial industry improved 15,000 (1.8% y/y). Jobs in education gained 7,400 (1.9% y/y), and in the wholesale trade sector they rose 5,000 (1.0% y/y). In the information sector, employment ticked only 1,000 higher (1.4% y/y), and transportation & warehousing employment eased 2,500 (+1.1% y/y), the second decline in three months. Government sector employment increased 20,000 (0.6% y/y), the strongest rise since August. This strength reflected a 19,000 increase (0.7% y/y) in local government hiring. Federal government jobs rose 2,000 (0.8% y/y) but the number of state government jobs fell 1,000 (+0.1% y/y), the fifth decline in as many months.

The length of the average workweek held steady m/m at 34.4 hours following a decline from 34.6 hours in January. The factory sector workweek eased m/m to 40.6 hours, down from the 41.1 hour peak in November 2014. Construction hours declined to 38.7, down from 39.6 three months ago. Private service sector hours held steady at 33.3, down slightly from last year's peak.

Aggregate hours worked (employment times hours) improved 0.2% last month and 1.9% y/y. They rose at a steady 1.8% annual rate during Q1.

Average hourly earnings rebounded 0.3% (2.3% y/y) following slight declines in two of the prior three months. Annualized growth has been accelerating from 1.3% late in 2012. Factory sector earnings rose 0.3% (2.4% y), and private service producing earnings gained 0.2% (2.3% y/y). Continuing strong were earnings in leisure & hospitality which rose 0.3% (3.0% y/y). Financial industry earnings rose 0.5% (2.6% y/y), but education & health care earnings eased slightly (+1.8% y/y).

From the household jobs survey, the unemployment rate's up-tick to 5.0% left it equal to the Q4'15 average. Employment rose 246,000 (2.0% y/y) and the labor force increased 396,000. A better job market is encouraging reentry into the labor market. Labor force growth of 1.5% y/y is the strongest since early 2007. As a result, with population growth of 1.1% y/y, the labor force participation rate rose to 63.0% last month, the highest level since March 2014.

The average duration of unemployment eased to 28.4 weeks after rising to 29.0 weeks in February. That was up from a cycle low of 26.3 weeks, six months ago. Long-term unemployment has been reduced. The number of persons out of work for 52 weeks more is down 15.0% y/y, and by roughly two-thirds from the 2011 peak.

Education matters when it comes to unemployment. For those with less than a high school diploma, the unemployment rate of 7.4% compared to 5.4% for high school graduates, but no college. For individuals with some college or an associate degree, unemployment averaged 4.1%, but for college graduates it was 2.6%.

The labor market data is contained Haver's USECON database. Detailed figures are in the EMPL and LABOR databases. The expectations figure is in the AS1REPNA database.

Employment: (SA, M/M Change, 000s) Mar Feb Jan Mar Y/Y 2015 2014 2013
Payroll Employment 215 245 168 2.0% 2.1% 1.9% 1.6%
 Previous -- 242 172 -- -- -- --
 Manufacturing -29 -18 18 -0.2 1.1 1.4 0.8
 Construction 37 20 18 4.7 4.8 5.0 3.7
 Private Service-Producing 199 251 131 2.6 2.5 2.1 2.1
 Government 20 9 13 0.6 0.5 0.0 -0.3
Average Weekly Hours - Private Sector 34.4 34.4 34.6 34.5
(Mar.'15)
34.5 34.5 34.5
Private Sector Average Hourly Earnings (%) 0.3 -0.1 0.5 2.3 2.3 2.1 2.1
Unemployment Rate (%) 5.0 4.9 4.9 5.5
(Mar.'15)
5.3 6.2 7.4
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