Payrolls up 242,000 and unemployment rate unchanged at 4.9%
Last week’s jobs report was yet another sign that the United States’ economy continues it’s slow but marked growth despite the increasing global economic uncertainty over the past few months. With payrolls increasing by 242,000 and the previous two months’ jobs numbers (December and January) revised upward, the nation has seen 65 straight months of job growth.
However, the real story in this jobs report goes well beyond the headline numbers. The civilian labor force grew by 555,000 in February, the largest one-month gain in more than a year, and the U.S. has now seen an increase in the labor force of more than 2 million people in the last year. The labor force participation rate (the ratio of the adult population that is either working or actively seeking work) increased to 62.9 percent, it’s highest level in over a year.
The historically low (and declining) labor force participation rate has been a significant concern for economists and policymakers ever since the recession ended. Despite more than five years of consecutive payroll increases and relatively low unemployment rates, the share of adults working or actively working has plunged to historic lows, prompting concern that the economy was not growing rapidly enough to encourage long-term unemployed or discouraged workers to leave the sidelines and enter the workforce.
We’ve now seen five straight months of labor force participation rate increases since September, the longest such streak since the recession began more than eight years ago. Although monthly numbers can sometimes by noisy and do not necessarily indicate long-term trends by themselves, this is an encouraging sign that the economy is growing rapidly enough for discouraged workers and long-term unemployed jobseekers to begin actively seeking work again. This also may align with economists’ assertions that there is a significant pool of workers who are not counted in standard job market indicators (such as unemployment rates) but would be willing to work under the right circumstances.
An increasing labor force participation rate, however, may also have the effect of keeping wages flat. The jobs report showed a slight decline (3 cents) in average hourly wages after a nice increase of 12 cents in January. Basic economics tell us that a strengthening labor market in which more workers are coming off the sidelines to enter the workforce will mean more competition for jobs, which will in turn keep wages depressed. However, a growing labor force also means that more people are contributing to economic growth, keeping inflation muted.
We will keep our eye on the labor force participation rate in the following months, but this could be the start of a significant turnaround in our economy. There is reason for optimism in this jobs report that the labor market is firming up in ways that go beyond the standard unemployment rate.
More to come…