Monday, April 7, 2014
5 signs the US job market may finally be accelerating
Few people responded to the March jobs report with high-fives and cheers. But there may be reasons to applaud in the months ahead.
Hiring in March was close to the economic recovery's steady but hardly explosive monthly average of the past two years: 192,000 added jobs. The unemployment rate remained 6.7 percent for a second straight month, according to the government's report Friday.
That wasn't the blockbuster figure predicted by some economists, who figured hiring would take off in March after a winter when factory orders, home sales and auto buying were slowed by severe weather.
Yet tucked into the March jobs report and other recent indicators were hints of stronger job growth ahead:
Hiring over the past 12 months has outpaced population growth. More workers in the prime 25- to 54-year-old age group are finding jobs. The winter freeze was less destructive to hiring than had been assumed. Layoffs have declined since February. And an increase in hours worked suggest that incomes will rise.
Here are five signs that the U.S. job market may finally be picking up :
JOB GROWTH VS. POPULATION GROWTH
For much of the recovery, the economy suffered from a fundamental problem: We were adding more people than jobs.
Employers hired 2.4 million people in 2012. That sounds decent. But it's less impressive when you consider this: The working-age population swelled by 3.8 million that year, according to the employment report's survey of households. A similar gap existed in 2013.
The share of the population with jobs -- the so-called employment-population ratio -- ended both 2012 and 2013 at 58.6 percent. That was down sharply from 63 percent before the recession started in late 2007.
But encouragingly, the trend reversed itself in March: About 2.35 million people were hired over the preceding 12 months. That was slightly more than the rise in population over the same period. The employment-population ratio ticked up to 58.9 percent, its highest level since August 2009.
When an economy adds fewer jobs than people, it loses some ability to accelerate. The economy is carrying more weight and less muscle.
Some of this reflects an aging population: More baby boomers are retiring. But another factor is that some people who hunkered down at colleges during the recession have emerged with new degrees and brighter career prospects. And they've started to look for jobs.
Can the gains continue? Tough to say. But we're faring better than we should considering that the vast baby boom generation has begun to retire.
PRIME-AGE WORKERS ARE RETURNING
After the Great Recession ended in mid-2009, a declining share of 25- to 54-year-olds were working. Roughly 80 percent of this age bracket had been employed before the downturn. The figure sank as low as 74.8 percent toward the end of 2010.
But it recovered in March to 76.7 percent, the best reading since February 2009.
"People have gone back to get training and educated and will be more aggressive" and "possibly getting better-paying jobs," said Scott Anderson, chief economist at Bank of the West.
WE'VE ESCAPED WINTER
Perhaps the snow trapped your car on an Atlanta freeway. Or maybe you coped with chronic school closings in Philadelphia. Maybe flight cancellations delayed your business meeting to sign a big contract.
We're still figuring out how badly the snowstorms disrupted the economy. But hiring never succumbed to the freezing temperatures as much as economists had feared. Revised figures show that 197,000 jobs were added in February and 144,000 in January -- a combined 37,000 more than initially estimated.
Other corners of the economy are emerging from hibernation. Auto sales, for example, rose 6 percent to 1.5 million vehicles in March after dismal figures the previous two months.
FEWER PINK SLIPS
The jobs report provides a "net" figure. The 192,000 jobs that employers added in March results from a simple equation: Jobs filled minus jobs cut. The government calculates the total number of jobs compared with the previous month, while accounting for seasonal variations.
So when companies lay off few workers, the net jobs figure should rise. And layoffs have indeed declined. The government reports weekly on applications for unemployment benefits. These applications are proxies for layoffs. During March, 71,000 people fewer people sought benefits than in February.
The average workweek rose to 34.5 hours from 34.3 hours in February. That doesn't seem like much -- just 12 minutes more. But those extra minutes help boost incomes, Deutsche Bank economist Joseph LaVorgna said in a research note. Hourly workers are taking home more pay over the course of a week -- about $17 more than they did at this time last year.
Judging from tax receipts, that's having "a significant impact on household income creation," LaVorgna said. And consumer spending is the lifeblood of growth, accounting for about 70 percent of the economy.
Higher incomes should fuel spending. Economists are already citing the auto sales as a sign of more robust spending to come. Based on March's "strong auto sales, this seems to be providing plenty of firepower for discretionary consumer spending," said Jay Feldman, an economist at Credit Suisse.
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