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HFF Analysis of the April 2017 BLS Employment Report

Friday, May 05, 2017

HFF is pleased to report on the latest employment expansion statistics from April 2017. Our research team analyzes trends and data to give readers a better view into the current state of the economy and how employment is being affected.

Employment Expansion

U.S. job growth picked up again in April as nonfarm payrolls rose 211,000 and wages rose 2.5 percent. The unemployment rate fell to 4.4 percent, the lowest level in nearly a decade, providing reassurance the economy is strengthening. Payroll creation has averaged 200,000 since October 2010, marking the 79th month of consecutive growth. The underemployment rate fell to 8.6 percent in April, the lowest level since December 2007, offering more evidence the labor market is tightening. The labor force participation ticked down to 62.9 percent in April, which is near a multi-decade low.

Average Payroll Creation Slowing

The current expansion cycle is similar to 1991 to 2000 and greater than the 2004 to 2007 expansionary period, but only after a significantly delayed recapture of the nation’s previous employment peak.

April BLS Jobs Report - Avg. Payroll Creation Since Oct 2010 = 200K

Attractive Job Growth Cooling

The U.S. created 2.16 million jobs in 2016, the smallest gain for a calendar year since 2011. The last six years’ job growth is on par with the expansionary period from 1992 to 1995.

April BLS Jobs Report - Annual Employment Growth

In 2016, the U.S. created 2.16 million jobs. But nearly 32 percent of private-sector job gains came from construction, manufacturing, retailers, hotels, restaurants and temporary help agencies, all typically low-paying sectors. Combined, Retail Trade (75,000) and Leisure and Hospitality (304,000) created approximately 379,000 jobs in the year ending April 2017, accounting for some 17 percent of the headline growth nationwide.

Retail Trade accounts for 35 percent of the headline Trade, Transportation and Utilities growth. We can therefore assume continued broad-based growth in the retail and industrial property types as we progress deeper into the economic recovery. Professional Business Services, the industry sector most closely aligned with office using employment, experienced expansion of 612,000 jobs in the year ending April 2017, the highest of any major employment sector.

Fortunately, Temporary Staffing only accounted for 112,000 (approximately 18 percent) of these positions. Temporary Staffing is slowing, however, implying hesitance in hiring the lowest cost employees companies can find in tentative expansions. Education & Health Services, which has performed well throughout the downturn being a recession-resistant industry, expanded by 512,000 jobs in the year ending April 2017. Mining and Logging continues to undermine headline growth but turned positive this month with approximately 21,000 jobs being added in the year ending April 2017.

April 2017 Employment Report -- Year over year change

Unemployment Rate

The Underemployment Rate augments the Unemployment Rate to include anyone marginally attached to the labor force that is either not employed or employed only part time. Fortunately, the Underemployment Rate has descended from a recent high of just over 17 percent. However, the spread between the two rates is near an all-time high and shows no sign of rapid compression. The Unemployment Rate dropped down to 4.4 percent in April, the lowest level since May 2007. The Underemployment Rate dropped to 8.6 percent in April, the lowest level since December 2007, offering more evidence the labor market is tightening.

April Employment Report -- Unemployment rate

Wage Growth

As the labor force approaches “full employment,” much attention has been cast to wage growth. The past three recessions were preceded by a period of FOMC tightening. Average hourly earnings growth exceeded four percent in each of these periods as overall economic activity became reflected in strong wage growth. With the current year-over-year percent wage growth registering approximately 2.5 percent, one could argue overall economic activity has not yet reached levels that precede recessionary periods (often accompanied if not triggered by FOMC tightening to counter inflationary forces).

April BLS Jobs Report -- Wage Growth

Sources: HFF Research, Bureau of Labor Statistics, Department of Labor, Bloomberg

Prepared by Morgan Allen, HFF Research Analyst





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