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Economy in Brief

U.S. Payroll Increase Disappoints; Jobless Rate Holds Steady; Earnings Strengthen
by Tom Moeller & Carol Stone  April 3, 2015

Job market improvement lost steam last month. Nonfarm payroll employment during March increased 126,000 (2.3% y/y) following a 264,000 February rise, revised from 295,000. January's advance also was lessened to 201,000 from 239,000. The latest increase compared to expectations for 248,000 in the Action Economics Forecast Survey. Weakened job increases were apparent in all categories. The unemployment rate of 5.5% remained unchanged, however, at its lowest point since May 2008. The overall unemployment rate, including marginally attached and those working part-time for economic reasons, slipped to a new low of 10.9%.

From the payroll market survey, the 126,000 worker advance was the weakest since December 2013. It reflected weaker growth in each employment category. Factory sector jobs slipped 1,000 (+1.6% y/y) after a negligible 2,000 rise in February. The construction sector also posted a 1,000 worker decline (+4.9% y/y). Private service sector employment improved 142,000 (2.7% y/y), the weakest advance since February 2014. Professional & business services jobs grew 40,000 (3.5% y/y), about the same as in February. Temporary jobs rose 11,400 (5.3% y/y), the first gain in three months. Education & health services employment rose 38,000 (2.5% y/y) and retail employment advanced 25,900 (2.1% y/y). Transportation & warehousing jobs grew 9,500 (3.6% y/y) and leisure & hospitality employment rose 13,000 (3.4% y/y). Financial activities employment gained 6,500 (1.7% y/y) while wholesale trade jobs rose 5,800 (1.9% y/y). Government sector payrolls declined 3,000 (+0.3% y/y), extending a string of three consecutive months of little change. State government employment fell 4,000 (+0.4% y/y) and federal government jobs fell 2,000, unchanged y/y. Local employment grew 3,000 (0.4% y/y).

The length of the average workweek slipped to 34.5 hours reflecting declines in the manufacturing (40.9 hours) and construction (39.1 hours) sectors. Private service-producing hours remained unchanged at 33.4 hours. Aggregate hours worked (employment times hours) slipped 0.2% (+2.7% y/y), the first decline since December 2013. For Q1, aggregate hours rose at a 2.2% annual rate after a 4.1% Q4 rise. During the last ten years, there has been a 67% correlation between the change in aggregate hours and the change in real GDP.

Employee compensation is improving. Average hourly earnings increased 0.3% (2.1% y/y) following a 0.1% uptick. During the last three months, earnings have soared at a 4.0% annual rate, double the growth during the last several years. There was notable strength during the last three months in the construction (6.4% AR) and private service producing (4.0% AR) areas, particularly in the professional & business sector. Factory sector earnings also were up at a 3.4% rate, the quickest rate of increase in two years.

From the household employment survey, the steady unemployment rate of 5.5% reflected a 34,000 worker gain (1.7% y/y) in employment and a 96,000 decline in the labor force (+0.4% y/y). The noninstitutional population rose 0.1% to 250.1 million (1.1% y/y); these combined moves pushed the labor force participation rate back down to 62.7%, tied for the lowest since late 1977. The participation rate for adult men slipped to 71.9% while for adult women it held steady at 58.1%.

The average duration of unemployment fell to a recovery low of 30.7 weeks versus 40.6 weeks at the cycle peak. The percent out of work for 52 weeks or more was 20.0% versus 32.4% at the cycle high.

The unemployment rate for individuals with less than a high school diploma rose to 8.6%, marking a sixth month of non-improvement following a low of 7.9% back in October. The jobless rate for those with a high school diploma but no college was 5.3% and has hovered in a narrow range since September. Individuals with some college but less than a bachelor's degree saw 4.8% joblessness, a new low since the recession, while those with a bachelor's degree or higher extended a recent marked decline, reaching 2.5%.

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: (M/M Chg., 000s) Mar Feb Jan Y/Y 2014 2013 2012
Payroll Employment 126 264 201 2.3% 1.9% 1.7% 1.7%
 Previous -- 295 239 -- -- -- --
 Manufacturing -1 2 17 1.6 1.4 0.8 1.7
 Construction -1 29 41 4.9 4.8 3.7 2.1
 Private Service Producing 142 244 151 2.7 2.2 2.2 2.2
 Government -3 0 -1 0.3 0.0 -0.3 -0.8
Average Weekly Hours - Private Sector 34.5 34.6 34.6 34.5
(Mar.'14)
34.5 34.5 34.4
Private Sector Average Hourly Earnings (%) 0.3 0.1 0.6 2.1 2.1 2.1 1.9
Unemployment Rate (%) 5.5 5.5 5.7 6.6
(Mar.'14)
6.1 7.4 8.1
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