The U.S. Labor Department’s April 7 employment report left me befuddled. The consensus estimate from the large group of economists who publish their monthly employment predictions was 175,000 new jobs were created, and the real number came in at 98,000, an astounding miss.
I wondered if there could there was some weakness being exhibited in the economy, which could impact new housing starts and the general non-public construction sector? But wait, the other shoe dropped-the unemployment rate fell from 4.7% to 4.5%, dipping to its lowest level in almost a decade on just 98,000 new jobs, well off the previous two months’ pace. Most economists consider 4.5% unemployment to be the absolute tightest the labor market can get, and where the Help Wanted signs hit their peak.
The explanation is simple. At a very high level, many tens of thousands of job openings went unfilled due to a lack of qualified employees, and strong labor demand far outpaced the supply of good workers. And it didn’t take long for the financial and economic experts to chime in: While everyone admits the U.S. labor market got off to a robust start in 2017, with January and February hires averaging 236,500 jobs a month, the dip initially came as a surprise.
In looking at why the two figures diverged, we should be comforted in knowing that the fundamentals of the job market remain strong. And in another sign of labor market tightness, average hourly earnings were up 2.7% from a year earlier. According to reports in the business press, the jobs number comes from a survey of businesses and government agencies, while the unemployment rate is from a survey of households, so an occasional mixed signal between the two numbers is inevitable. The weather probably played a role last month, as a winter storm hit during the Labor Department’s survey, and people who missed a paycheck that week weren’t counted as employed in the business survey. But people who miss work because of the weather still get counted as employed in the household survey.
As our industry struggles to fill hourly positions, with every producer-client reporting shortages of drivers and other personnel as the key selling season nears, two bright spots in Friday’s report reinforce the market’s strength: a continued decline in long-term unemployment and a solid increase in wages. The takeaway is simple: A robust economy is pushing jobs to the limit, and our industry will benefit from the growing revenues generated by employment optimism.