Bank of the West US Outlook Report for April 8, 2016

Through the lens of the March jobs report, the U.S. labor market recovery continues unabated. Nonfarm payroll job gains came in about as we expected at +215K jobs and better than the consensus estimated. But by focusing on the headline numbers, are we only seeing the labor market through rose colored glasses?
What are other labor market indicators telling us about the current health and future state of the US jobs market? Here the view is less rosy with several indicators already pointing to a more subdued future for U.S. job growth.
The job openings and labor turnover (JOLTS) data from the Bureau of Labor Statistics for February revealed a few chinks in the labor market’s armor with forward-looking job openings falling to 5.44 million from an upwardly revised 5.6 million in January. This is partly due to the fact that a lot of job vacancies were filled in February.
Moreover, the Fed’s recently designed comprehensive labor market conditions index (LMCI), a weighted average of 19 key labor market indicators from the unemployment rate and labor force participation rate to average weekly hours, was negative for the third consecutive month in March. The LMCI remains near its lowest levels in this expansion so far- a less than stellar view of labor market momentum and resilience.
On a more positive note, the unemployed-to-job openings ratio has once again returned to its pre-recession (9-year) low —a testament to the extent of labor market healing achieved to date.
And employers are hiring at a rapid pace again. Hirings climbed to 5.42 million in February from 5.12 million the month before, the highest level since November 2006. Robust growth in hiring suggests that jobs were filled faster due to better opportunities with better pay.  But it will be difficult for hiring to maintain its recent pace in the months ahead in the face of somewhat lower job openings.
As the Fed often says, the labor market recovery has made considerable progress. But in many ways the labor market recovery remains subdued with some visible chinks in the armor (job openings and LMCI) beginning to show. Expect somewhat softer year-on-year job growth in the quarters ahead.
To find out more, check out this week’s US Outlook Report.
Tags: , , ,