Finally the jobs picture seems to be improving to the point that the ugly unemployment rate can start to meaningfully come down. During March, employers added 216,000 which exceeded expectations of 185,000. I love the fact that private employment soared by 230,000 and that government employment actually fell. As we all know it is the private sector that creates wealth and is the engine of the economy.
All Systems Go
The unemployment rate fell a bit to 8.8%, but as I’ve mentioned before, I don’t put a lot of stock in this headline figure due to its exclusion of discouraged and underemployed workers. The U6, which includes these workers, fell to 15.7%, which is still high, but a big improvement over earlier months. This measure peaked at 17.4% in the Fall of 2009.
Employment growth has been the one major factor that has lagged during the recovery, but that seems to be changing before our eyes. Without meaningful growth in jobs, there is no way this expansion could continue for any significant length of time. Consumer spending is 70% of our economy and jobs are the fuel for that spending. All is certainly not back to normal, but there is no denying that we have turned the corner.
Needs Improvement
Wage growth has been pretty bad for most Americans for a long time now. Ironically this is seen as good for the stock market by some because it means lower costs and higher profits for corporations, which are sitting on record amounts of cash right now. Weak income growth shows that the labor market is still weak since workers don’t have the bargaining power to demand higher wages. This happens in a strong economy and is a big contributor to inflation.
We are still some time away from sustainable wage growth, but the recent jump in payrolls is certainly a cause for optimism. We cannot achieve wage gains without increases in actual employment first. As the saying goes, “One must first learn to crawl before he can walk.”
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