March 2016 Employment Report

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According to the Bureau of Labor Statistics’ (BLS) establishment survey, non-farm payroll employment rose by 215,000 jobs in March -- slightly above expectations of +210,000. In addition, combined January and February employment gains were trimmed by 1,000 (January: -4,000; February: +3,000). Meanwhile, the unemployment rate (based upon the BLS’s household survey) ticked up to 5.0% as the expansion in the civilian labor force (+396,000) exceeded the change in the number of people with jobs (+246,000). 

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Observations from the employment reports include:

* Manufacturing lost 29,000 jobs in March. Those results are generally consistent with the behavior of the Institute for Supply Management’s manufacturing employment sub-index, which declined in eight of the 12 months ending in March, and has been in outright contraction during the most recent four months. Wood Products: -800 jobs; Paper and Paper Products employment was unchanged.

* Mining and logging shed 12,000 jobs, with 9,900 coming from support activities for mining and another 1,100 from oil and gas extraction. Construction added 37,000 jobs.

* Over 88% (171,700) of March’s private-sector job growth occurred in the sectors typically associated with the lowest-paid jobs -- Retail Trade: +47,700; Professional & Business Services: +33,000; Education & Health Services: +51,000; and Leisure & Hospitality: +40,000. This is a persistent issue, as we have repeatedly highlighted: There are 1.455 million fewer manufacturing jobs today than at the start of the Great Recession in December 2007, but 1.526 million more Food Services & Drinking Places (i.e., wait staff and bartender) jobs. 

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* The employment-population ratio edged up to 59.9%; roughly speaking, for every five people added to the population, three are employed. Meanwhile, the number of employment-age persons not in the labor force retreated by 206,000 to 93.5 million. 

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* The labor force participation rate (LFPR) also rose to 63.0%, comparable to levels seen in late 1977. Average hourly earnings of all private employees increased by $0.07 (to $25.43), resulting in a 2.3% year-over-year increase. For all production and nonsupervisory employees (pictured above), hourly wages were rose by $0.04, to $21.37 (also +2.3% YoY). With the CPI running at an official rate of +1.0% YoY, in theory wages are rising in real (inflation-adjusted) terms. The average workweek for all employees on private nonfarm payrolls was unchanged at 34.4 hours. 

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* Finally, full-time jobs jumped by 241,000 while part-time jobs edged down by 35,000. Full-time jobs have been trending higher since December 2009, and are now 1.572 million above the pre-recession high (although, for perspective, the non-institutional, working-age civilian population has risen by an estimated 19.6 million during that time period). Part-time jobs, by contrast, have been stuck in a channel between roughly 27 and 28 million. 

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For a “sanity check” of the employment numbers, we consult employment withholding taxes published by the U.S. Treasury. Although highly seasonal, the data show the amount withheld in March increased by $9.3 billion, to $216.7 billion -- the highest amount on record for that calendar month. To reduce some of the volatility and determine broader trends, we average the most recent three months of data and estimate a percentage change from the same months in the previous year. The average of the three months ending March were 3.8% above the year-earlier average, well off the peak of +13.8% set back in September 2013.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.