In spite of many apparent obstacles – notably the decline of brick-and-mortar retail and lethargic car sales – the U.S. labor market perseveres and excels.
In its latest monthly employment assessment Friday, the Bureau of Labor Statistics reported that the economy exceeded expectations in job creation, adding 222,000 jobs when 179,000 were predicted.
As a lagging economic indicator, the monthly unemployment rate is generally seen as a reliable recessionary predictor, and these numbers suggest that a recession is not imminent, especially when applications for unemployment benefits, regarded as reliable current economic indicators, are thrown into the mix. Such applications went up recently but were readily attributed to temporary factors – such as automakers shutting down plants for summer overhauls – and remained well below the 300,000 level believed to be a symptom of an unhealthy economy.
But there always seems to be a flipside to economic news. In this case, more jobs have been added, but the unemployment rate went up modestly – to 4.4%. The usual rationale that is given for this is that people who had previously given up their job searches returned to the labor market, increasing the pool of potential employees.
Some of the job increases could also be attributed to the start of the summer employment season for young people and seasonal construction and agricultural work.
Such jobs may also contribute to sluggish wages, a persistent headwind for the economy.
The Federal Reserve, which has been raising interest rates in recent months and is expected to do so again before the end of 2017, noted the tepid pace of pay rates. “Despite the broad-based strength in measures of employment, wage growth has been only modest, possibly held down by the weak pace of productivity growth in recent years,” the Fed observed in its revised economic report Friday.
John Boyd Jr., principal of Princeton, New Jersey-based corporate location consultant The Boyd Co. Inc., said the report signals “increased labor market participation,” observing that the labor force participation increased from 62% to 63%.
“The multiplier benefits of climbing wages will help the economy in a myriad of areas,” Boyd said, although as noted wages have not kept pace with job increases thus far.
Nevertheless, Boyd noted, “Most of the increases in employment are in professional services, health care and banking and finance. While manufacturing job figures are weak, I expect those numbers to see a bump over the next year or so once manufacturers have a clearer sense of what will happen with tax, trade and infrastructure policy.”
Boyd was optimistic about what the latest figures imply for the economic future.
“No doubt Trump's America First agenda and his tweaking of the federal procurement program have created new tailwinds to help spur manufacturing,” he said.