Today’s Jobs Report and the Promise of Noninflationary Growth
Today’s Jobs Report and the Promise of Noninflationary Growth
A Robust Establishment Survey
As predicted by recent uptick in online job postings, today’s jobs report is strong across the board, with 303K jobs added in March, and the prior two months’ figures revised upwards by a combined 22K. Job gains were more broadly distributed across the economy than they have been in recent months. Average weekly working hours ticked back upwards to 34.4 hours, and the work week for production and nonsupervisory workers was the longest it has been in a year.
Improvement in the Household Survey
After months of diverging sharply from the establishment survey and being substantially weaker, the household survey improved in March. Its measure of the labor force increased by 469K and its measure of the employment level increased by 498K. The unemployment rate ticked back downwards to 3.8% and labor force participation rebounded from 62.5% to 62.7%.
The reasons unemployed Americans gave for being unemployment improved, with an increase in the number of people who quit jobs or recently entered the labor force for the first time, and a decline in the number of people who lost jobs.
One exception to the overwhelmingly positive data was the large 0.8 percentage point increase in the unemployment rate for black Americans, but this is more likely the result of low survey response rates and statistical noise in the estimates regarding smaller subpopulations.
Accelerating Job Growth; Decelerating Wage Growth
At the same time that measures of employment improved and labor utilization improved, the report suggests that inflation is easing. Wage growth ticked down from 4.3% to 4.1% over the year—a rate that may be consistent with the Fed’s 2% inflation target given strong growth in productivity. On a 3-month or 6-month annualized basis, wage growth is now closer to 4.0%.
The Holy Grail of Noninflationary Growth
The combination of strong, broad-based job growth and easing wage growth is a macroeconomist’s holy grail, and the Fed’s dream scenario. It suggests that the U.S. is experiencing a period of non-inflationary growth, as it did in 2018-2019, with a similarly low unemployment rate but about 100K more jobs being added each month.
Today’s report came as a surprise to many economists, but its strength should not have been so unexpected. An acceleration in the labor market is consistent with the recent strength in a range of economic indicators:
Online job postings have now risen for two straight months following a 20-month slide (Zip data).
Jobless claims have been low and stable, showing no deterioration in the labor market.
Leading indicators for the economy have recently turned positive for the first time in two years.
The U.S. manufacturing PMI was strong in February and March after 17 months of weakness, with new orders and inventories rising. Employment typically follows.
Workers have now enjoyed positive real wage growth since May 2023, a 5-month stock market rally, and easing financial conditions ahead of anticipated rate cuts later this year, all of which are tailwinds boosting consumer confidence, CEO confidence, household spending, business investment.
The Fed will likely be pleased to see this Goldilocks report consistent with its dual mandate of achieving both full employment and price stability. Those two goals do not currently appear to be at odds. Workers may be able to enjoy both at once, even when interest rates begin to normalize.
Take a tour through the Jobs report in ZipRecruiter charts.
