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HFF BLS Employment Report March 2016

Wednesday, April 20, 2016

HFF is pleased to report on the latest employment expansion statistics from March 2016 and a look back at 2015. 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.

Job and Payroll Growth

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

Average Monthly Payroll Creation March 2016

The U.S. created 2.7 million jobs in 2015, the second highest level of expansion since 1999. The last five years’ job growth is on par with the expansionary period from 1992 to 1995.

March 2016 Job Growth

Quality of Job Growth

Job growth quality has remained a persistent concern during the recovery due to lagging wage growth and a concentration of job gains in low-paying sectors. In 2015, the U.S. created 2.7 million jobs. But nearly 42 percent of private-sector job gains came from construction, manufacturing, retailers, hotels, restaurants and temporary help agencies, all typically low-paying sectors.

Quality of Job Growth Graph March 2016

Combined, Retail Trade (378,000) and Leisure and Hospitality (472,000) created approximately 850,000 jobs in the year ended March 2016, accounting for some 30 percent of the headline growth nationwide. Retail Trade accounts for 76 percent of the headline Trade, Transportation and Utilities growth. Given Wholesale Trade (52,500) and Transportation/Warehousing (52,800) account for the remaining share, we can 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 606,000 jobs in the year ended March 2016.

Quality of Job Growth Analysis March 2016


Construction, Manufacturing, Retail Trade, Temporary Staffing, Other Services and Government, each shaded in the table above, accounted for 902,000 new jobs in the year ended March 2016. This equates to ~32 percent of headline growth. The below graph manifests Temporary Staffing’s role in the increase in the Professional and Business Services sub-sector. The greater contribution of full-time positions within Professional and Business Services portends corporations’ greater confidence in the sustainability of their profitability.

Fortunately, Temporary Staffing only accounted for 55,000 (~9 percent) of these positions. Temporary Staffing remains high, however, the share has decreased in recent months. Education and Health Services, which has performed well throughout the downturn being a recession-resistant industry, expanded by 711,000 jobs in the year ended March 2016, the highest of any major employment sector. Mining and Logging has turned negative from nine months prior and retail continues to account for more headline trade. These potentially worrisome trends are offset by the decrease in temporary staffing.


Quality of Job Growth Changes March 2016

Current Jobless Claims

Though it required a protracted period of time, trends in Jobless Claims have returned to favorable territory. Initial Claims are at last, and predictably, below 300,000 per week. Continuing Claims are also finally below 2.25 million per week. Therefore, layoffs appear to have stabilized to more historically average levels.

Weekly Initial and Continuing Jobless Claims March 2016

Jobless Claims vs. Unemployment Rate

Initial Claims, an alternative representation of layoffs, are slowly beginning to tick up but are still well below the 47 year average of 364,896. The Unemployment Rate typically declines at a slower pace than Initial Claims for unemployment benefits. As stated previously, the level of ‘bounce’ in monthly payroll expansion is on par with the 2004 to 2007 era, but has not proven fast enough to recapture such a significant drop in employment. Retiring employees and the discouraged unemployed are leaving the labor force, reducing the denominator in the equation of the Unemployment Rate dramatically.

Jobless Claims vs. Unemployment Rate March 2016

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 is descending 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.

Unemployment Rate March 2016

Wage Growth

As the labor force approaches “full employment”, much attention is being cast to wage growth. The past three recessions were preceded by a period of FOMC tightening. Average hourly earnings growth exceeded 4 percent+ in each of these periods as overall economic activity became reflected in strong wage growth. With the current YOY percent wage growth registering ~2.3 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).

Wage Growth March 2016

Participation Rate

The labor force participation rate, which indicates the share of working-age people who are employed or looking for work reached a nine year low of 62.4 percent in September 2015. The participation rate increased for the fourth month in a row, reaching 63 percent this month, the highest since March 2014.

Participation Rate March 2016

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