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Steady U.S. Job Growth Sets Stage for Fed to Raise Interest Rates Steady U.S. Job Growth Sets Stage for Fed to Raise Interest Rates
(about 1 hour later)
Employers added 235,000 workers to their payrolls in February, the government reported on Friday, a hefty gain that clears the path for the Federal Reserve to raise its benchmark interest rate when it meets next week. Even the weather cooperated. Pretty much all the ingredients needed for a rousing display of labor market strength lined up in February, with gains in payrolls, wages and the size of the overall work force.
The official jobless rate fell to 4.7 percent, from 4.8 percent in January, while average hourly earnings grew by 0.2 percent in a report that overlaps with President Trump’s first full month in office. The strong monthly jobs report on Friday — representing President Trump’s first full month in office — should sweep away any last-minute reservations harbored by Federal Reserve policy makers about raising the benchmark interest rate when they meet next week.
“They’re ready to go,” said Diane Swonk, founder and chief executive of DS Economics, referring to the central bank’s expected vote next week to raise rates from their historically low levels. “The economy is riding a wave of bullish sentiment postelection,” said Andrew Chamberlain, chief economist at Glassdoor, a career website. “We’re seeing strong labor demand across the board and no sign of slowing right now.”
Mr. Trump, who had dismissed the official jobs reports as phony when he was a candidate, reposted a comment on Twitter from the conservative website Drudge Report that said “GREAT AGAIN: +235,000.” And Sean Spicer, his press secretary, said it was “great news for American workers” in the “first report for @POTUS Trump.” With the Labor Department reporting a gain of 235,000 jobs for the month, Republicans and Democrats quickly jostled for credit.
Nothing has changed about the way the Labor Department collects and analyzes the jobs data since Mr. Trump took office. Sean Spicer, the White House press secretary, said of Mr. Trump, “He’s jump-started job creation, not only through his executive action but because of the surge in economic confidence and optimism that has been inspired since his election.”
The overall economic momentum and optimism received a push from February’s unusually warm weather, with almost a quarter of the jobs — about 58,000 — coming from construction alone. Manufacturing and mining also bounced up. Mr. Trump, who, as a candidate, repeatedly dismissed the official jobs reports as phony, reposted a comment on Twitter from the conservative website Drudge Report that said, “GREAT AGAIN: +235,000.” Mr. Spicer later quoted Mr. Trump on his faith in the report, “They may have been phony in the past, but it’s very real now.”
In the last three months, including revisions announced Friday, monthly job growth averaged 209,000, while year-over-year wage growth rose to 2.8 percent. But Republican self-congratulation clearly irked Democrats. Tom Perez, labor secretary in the Obama administration and now chairman of the Democratic National Committee, countered that Mr. Trump had “absolutely nothing” to do with the job gains. “Trump inherited an economy from Barack Obama with the longest streak of private sector job growth in history,” he said.
Although the economic anxiety that helped put Mr. Trump in the White House remains, the official jobless rate is near what the central bank considers full employment — a threshold where, in theory at least, everyone who wants a job at the going rate can find one. (The Labor Department repeated that it had not changed the way it collected and analyzed jobs data since Mr. Trump took office. “It’s business as usual,” said Megan Kindelan, director of public affairs at the Bureau of Labor Statistics.)
At the same time, jobless claims are near a 44-year low, the stock market is surging and consumer spending is growing, bolstering the case for those who argue the economy is strong enough to withstand an interest-rate increase. Although the economic anxiety that helped put Mr. Trump in the White House remains, the official jobless rate is near what the Fed considers full employment — a threshold where, in theory at least, everyone who wants a job at the going rate can find one. The official jobless rate fell to 4.7 percent, from 4.8 percent in January.
Particularly significant in February was the bump up in the labor participation rate to 63 percent, a result of rising employment even among people without a high school diploma. “There’s got to be some optimism that these people are feeling they finally have a chance,” Ms. Swonk said. At the same time, jobless claims are near a 44-year low, and the stock market is surging. Revisions to January’s estimates raised the three-month average of monthly job gains to 209,000 and annual wage growth to 2.8 percent, further bolstering the case for those who argue the economy is strong enough to withstand a rate increase.
On the other end are employers who are seeing acute labor shortages. “They offering training programs now,” she said. “They’re complaining about it. That’s what tight labor markets do. It forces you to invest more to work with less.” The overall economic momentum received a push from February’s unusually warm weather, with almost a quarter of the jobs — about 58,000 — coming from construction. Manufacturing and mining rose too.
Recruiters and employers complain that qualified workers are scarce, pushing them to raise wages, strengthen benefits and offer cushier amenities at the office. “There is a war for talent,” said Lauren Griffin, senior vice president at Adecco Staffing USA. “We’ve got people in orientation classes and they get up and leave because they’re contacted about another job that might be more money.” Also significant was the increase in the labor participation rate to 63 percent, a result of rising employment even among people without a high school diploma. “There’s got to be some optimism that these people are feeling they finally have a chance,” said Diane Swonk, founder and chief executive of DS economics in Chicago.
Even lower-skill workers in some sectors are finding themselves in more demand. The year-over-year wage gains for store managers and cashiers, for example, were twice the national average, said Andrew Chamberlain, chief economist at Glassdoor, a career website. On the other end are employers who are seeing acute labor shortages. “They’re offering training programs now,” Ms. Swonk said. “They’re complaining about it. But that’s what tight labor markets do. It forces you to invest more to work with less.”
Bigger paychecks are something that most Americans, after years of stagnant wage growth, are particularly eager to see. The Federal Reserve, too, has been waiting for an increase, but it is also wary of wages rising too fast. The board’s members want to head off incipient inflation and so have begun to slowly raise rates, which makes borrowing and risk-taking more expensive. At the same time, the Fed wants to avoid putting the brakes on job hiring, especially because the benefits of the eight-year-old recovery have been so unevenly distributed. Bigger paychecks are something that most Americans, after years of stagnant wage growth, are particularly eager to see. The Fed, too, has been waiting for an increase, but it is also wary of wages rising too fast. The board’s members want to head off incipient inflation without putting the brakes on hiring, especially because the benefits of the eight-year-old recovery have been so unevenly distributed.
Balancing those two goals is tricky.Balancing those two goals is tricky.
A broader measure of unemployment — which includes the millions of Americans who have given up looking for work altogether or are working part time but would prefer full-time jobs — dropped to 9.2 percent but is still high given how tight the labor market otherwise looks. Lauren Griffin, senior vice president at Adecco Staffing USA, said the scarcity of qualified workers had compelled employers to raise wages, strengthen benefits and improve amenities at the office. “We’ve got people in orientation classes,” Ms. Griffin said, “and they get up and leave because they’re contacted about another job that might be more money.”
Cautioning the Fed against moving too quickly with a rate increase, Elise Gould, an economist at the left-leaning Economic Policy Institute, noted: “Workers throughout the economy, including young workers, workers of color and low-wage workers, need a chance to make up lost ground on wage growth. To that end, the Federal Reserve needs to keep their foot off the brakes and let the labor market reach full employment.” At the same time, a broader measure of unemployment — which includes the millions of Americans who have given up looking for work altogether or are working part time but would prefer full-time jobs — dropped to 9.2 percent last month but is still high given how tight the labor market looks otherwise.
Where you live and what you do for work can determine how bright your economic prospects are. Cautioning the Fed against moving too quickly with a rate increase, Elise Gould, an economist at the left-leaning Economic Policy Institute, noted that, “Workers throughout the economy, including young workers, workers of color, and low-wage workers, need a chance to make up lost ground on wage growth.”
Those who reside in or near larger cities are receiving the highest gains, despite high housing costs. Large metropolitan counties have seen more than twice the annual wage growth of nonmetropolitan areas, according to the latest figures from the Bureau of Labor Statistics. Many Americans who live outside urban centers also have been shut off from most of the recovery’s rewards.
“Higher-wage jobs might be following educated, young workers, who are increasingly living in dense, urban neighborhoods as other demographic groups move to the suburbs,” said Jed Kolko, chief economist at the job-search site Indeed. “Broader economic shifts also favor big cities: The occupations projected to grow tend to be more urban, while shrinking sectors like manufacturing and farming tend to be located outside large metros.” Large metropolitan counties have had more than twice the annual wage growth of nonmetropolitan areas, according to the latest figures from the Bureau of Labor Statistics.
“Higher-wage jobs might be following educated, young workers, who are increasingly living in dense, urban neighborhoods as other demographic groups move to the suburbs,” said Jed Kolko, chief economist at Indeed, a job-search site. “Broader economic shifts also favor big cities: The occupations projected to grow tend to be more urban, while shrinking sectors like manufacturing and farming tend to be located outside large metros.”
That is disappointing for people with longstanding ties to smaller, more rural communities. “A lot of this has to do with mobility,” said Steven W. Rick, chief economist at CUNA Mutual Group, an insurance company. “People are going to have to move where the jobs are and not expect the jobs to come where they are.”That is disappointing for people with longstanding ties to smaller, more rural communities. “A lot of this has to do with mobility,” said Steven W. Rick, chief economist at CUNA Mutual Group, an insurance company. “People are going to have to move where the jobs are and not expect the jobs to come where they are.”
If some are in the wrong place, others lack the right skills for an economy heavily geared toward information and services. “There is a certainly still a talent shortage out there,” said Michael Stull, senior vice president at Manpower North America, a staffing agency. The firm’s annual survey of 2,200 hiring managers showed that 46 percent reported they had difficulty filling job vacancies in 2016, up from 32 percent in 2015. Although the Trump White House has had little time to make any substantial policy changes, anticipation of a rollback in taxes and regulations and the possibility of vast infrastructure spending has created optimism among employers and blue-collar workers.
Anticipation of a rollback in taxes and regulations as well as the possibility of vast infrastructure spending has drummed up optimism among employers and blue-collar workers. Mr. Trump’s outsize promises of 4 percent economic growth and millions of new jobs face potential headwinds, though. Dissension among Republicans and the unpredictability of Mr. Trump’s course in several policy areas could dampen job growth.
There are potential headwinds, though. Dissension among Republicans and unpredictability about Mr. Trump’s course in several policy areas could constrain the hiring outlook. The future of the Affordable Care Act and a possible replacement is making hospitals and community health centers cautious about adding workers. And a strong dollar and a potential backlash against the White House’s travel ban could slow tourism and hiring in the sector. Mr. Trump’s across-the-board hiring freeze on federal government jobs, combined with declines at the state level, is likely to contain the number of public sector employees.
The future of the Affordable Care Act and a possible replacement is making hospitals and community health centers cautious about adding to their staffs. And a strong dollar and a potential backlash against the White House’s travel ban could slow tourism, and thus hiring in the sector. Mr. Trump’s across-the-board hiring freeze on federal government jobs, combined with declines at the state level, is likely to keep down the number of public sector employees. The uncertainty extends to prospects for tax cuts. Some Wall Street analysts, expecting delays, have pared their growth forecasts for 2017, after recently raising them.
The uncertainty extends to prospects for tax cuts. Some Wall Street analysts, expecting delays, have pared down their growth forecasts for 2017, after recently raising them. Certainly the snapshot of February’s jobs picture is good. The question is, if the economy does slow, whether Mr. Trump will accept the legitimacy of weak reports as enthusiastically as he does good ones.
For the moment, though, optimism about the job market remains strong. Mr. Spicer suggested the president would. “Numbers are going to go up and down,” he said. “We recognize that.”
“The economy is riding a wave of bullish sentiment postelection,” Mr. Chamberlain of Glassdoor said. “We’re seeing strong labor demand across the board and no sign of slowing right now.”