Last Friday, as usual, the Bureau of Labor Statistics of the Labor Department published its monthly Employment Situation for March 2016. The report said the economy added 215,00o new positions last month. Revisions to prior months’ data were insignificant a–a loss of -1,000 jobs.
Despite the continuing strong jobs creation, the unemployment rate ticked up slightly to (a still very favorable) 5% of the workforce. In the past, that figure would be regarded as full employment. The 5% would be regarded as “frictional” unemployment, meaning it consists either of people who have quit their old job because they have a new one but are not starting right away, or of project workers who routinely have small gaps between jobs.
That would, in fact, be quite worrying, since wage inflation acceleration–and therefore overall inflation acceleration–would be imminent.
The financial markets have not been focused on the very low unemployment percentage, however. They have been, and continue to be, worried about the lack of wage gains–which, they argue, is evidence of continuing slack in the labor market.
Two recent contrarian thoughts:
–some are saying that the uptick in the unemployment rate is (finally) evidence that disheartened workers who have long since left the workforce (by stopping looking for work) are beginning to think that getting a job is now possible and are re-entering the workforce. So it’s an early sign of a significantly better tone to the labor market.
I think this is possible. Good news, if so. The only question I have is how it could have taken over six years since the economy bottomed for this to occur.
–the Fed is beginning to argue that wage gains are actually greater than corporate reporting would lead us to believe. The idea is that older, higher-paid workers are retiring and effectively being replaced by younger, lower-paid new hires. This is something that always happens in the early stages of economic recovery. Again, the question remains why wage-flattening has been going on for well over half a decade.
More on this topic tomorrow.