Jobs Report Gives Yellen Only Half of What Fed Chair Wants

  • Improving economy prompting more people to look for work
  • Growth not strong enough to provide sufficient full-time jobs

Not Back to Normal but U.S. Labor Market Shows Resilience

A slowly improving economy is pulling discouraged Americans into the workforce, although some are having to settle for part-time jobs for now.

That’s the message from the March employment report issued by the Labor Department Friday in Washington. Payrolls grew by 215,000 workers last month following a gain of 245,000 in February, according to employers the government surveyed. The separate poll of households showed the jobless rate ticked up to 5 percent from 4.9 percent as people streamed into the labor force looking for work, and not all were successful.

The gain in hiring shows businesses remain confident in U.S. prospects even amid the slowdown in global growth and turmoil in financial markets that Federal Reserve Chair Janet Yellen this week said prompted policy makers to signal a slower pace of rate hikes in 2016. The gradual approach in tightening monetary policy to allow the labor market to heat up further was reinforced by readings showing the world’s largest economy still wasn’t strong enough to provide more full-time work.

QuickTake Under the Hood of the Jobs Numbers

“This makes Yellen look smart,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. “People are getting more confident in the labor market, and more people are coming back in.” At the same time, the higher number of Americans working part-time for economic reasons shows there’s still slack in the economy, “so it’s kind of ammo for the go-slow crew.”

More Participation

The labor force participation rate, which indicates the share of working-age people who are employed or looking for work, rose to 63 percent, the highest since March 2014. The rate has climbed by 0.6 percentage point over the past six months, the biggest advance over a similar period since 1992.

Although it’s being depressed by the retirement of baby boomers, there is scope for it to continue to keep climbing as more Americans believe the odds of them landing a job are improving. Participation sank to a four-decade low of 62.4 percent in September.

The details showed that some people entering the labor force were only able to find part-time employment. The number of Americans working part-time for economic reasons rose by 135,000 to 6.12 million, the most since August.

Volatile Number

That number “is pretty volatile, but it moved in the wrong direction,” said Feroli.

In a speech before the Economic Club of New York on Tuesday, Yellen said she believed there was more slack in the labor market than indicated by the jobless rate, which is hovering near the level that officials say represents maximum employment. 

“I am particularly thinking about abnormally high levels of involuntary part-time employment,” Yellen said. She added that there were also more discouraged workers “who could be brought into the labor market.”

Still, the share of the working-age population with a job -- any job -- is growing, reaching an seven-year high in March, according to the Labor Department’s data. And some of those who want it may be able to transition to full-time work if the Fed’s go-slow approach spurs faster growth.

“The Fed’s still going to proceed with caution,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania and the best forecaster of payrolls over the past two years, according to data compiled by Bloomberg. “The Fed’s content letting the job market run hot for a while.”

And it probably needs to come to a more vigorous boil to sustain a pickup in wages, another positive aspect of Friday’s report. Hourly earnings on average climbed 0.3 percent in March from the prior month, more than forecast, after a 0.1 percent drop in February. Pay increased 2.3 percent from a year earlier, remaining within the general range seen over the past three years.

Job growth in higher-paying industries would go a long way toward driving up wages. Almost half of the March job growth, about 90,000 positions, occurred at retailers and leisure and hospitality businesses such as restaurants. Construction payrolls climbed by the most in three months, helping remove some of the sting from the biggest decline in factory employment since December 2009.

Another report Friday showed though that the hemorrhaging in jobs at the nation’s producers over the past two months may soon end. The Institute for Supply Management said its manufacturing gauge expanded in March for the first time in seven months, fueled by the strongest reading on new orders since November 2014.

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