FOR several months data-watchers have scratched their heads and attempted to peer through winter-storm distorted figures for a glimpse at the underlying labour-market trend in America. Some reckoned they saw signals of a tightening labour market, with further rapid declines in unemployment and wage growth taking off. Others feared a slowdown, pointing to plateaus in other indicators and the Fed’s eagerness to scale back accommodative monetary policy.
The suspense, as it turns out, was unnecessary. The latest jobs figures from the Bureau of Labour Statistics show a rise in payrolls of 192,000 jobs in March. That compares to an average increase of 188,000 jobs over the past six months, 183,000 over the past 12 months, and 182,000 over the past 24 months. And 187,000 since the beginning of 2011. For the last three years the recovery has had essentially one speed: plodding.
Matters could be worse, of course. Steady job growth is worse than intermittent growth or none at all. In March, private-sector payrolls surpassed their pre-crisis peak, a feat the euro area seems unlikely to achieve for years. The unemployment rate and the total number of unemployed have come down steadily—again, an achievement the euro zone can only dream about.
But too much of the improvement in unemployment figures has come from the exit of discouraged workers from the labour force. The trudging pace of employment growth has been above the rate needed to keep up with population, but only just. Given the enormous stock of jobless workers with which America began its recovery back in 2009—15.4m at the peak, now down to a still-abysmal 10.5m—a rapid rate of job growth was going to be necessary to avoid a prolonged crisis of long-term joblessness. Instead the temperature of the recovery has oscillated between tepid and lukewarm.
There are some encouraging signs in the latest figures. The household portion of the data showed a faster pace of employment growth in March, and some surprising strength in labour-force numbers for once. About half a million workers entered the labour force between January and March, nudging the participation rate up ever so slightly to 63.2%, from 63.0%. The employment-population ratio climbed to 58.9%: the best showing since August of 2009, though not that far above the post-crisis nadir of 58.2%. The surge in the labour force kept the unemployment rate steady at 6.7%, despite the jump in reported employment.
Therein lies the best hope for discouraged workers: that the Federal Reserve will become less worried about labour-market tightness and less eager to pull back economic support. The latest figures strongly suggest that the economy is a long way from full employment. Labour-force growth and a flat unemployment rate—now unchanged from December—are one indicator of excess capacity. A tick downward in wage growth, to 2.1% in March from 2.2% in February, indicates that firms aren’t having much trouble finding labour at prevailing pay rates. In combination with very weak inflation figures the jobs report demonstrates that there is very little risk of overheating any time soon.