Implications: The US labor market keeps getting better. Nonfarm payrolls beat consensus expectations, rising 215,000 in March. Meanwhile, civilian employment, an alternative measure of jobs that includes small-business start-ups increased 246,000. In the past year, payrolls and civilian employment are both up 234,000 per month, a solid trend. Although the unemployment rate ticked back up to 5.0%, the increase was due to 396,000 additional workers in the labor force, which has grown by 2.2 million in the past year. As a result, the labor force participation rate, which bottomed at a post-1977 low of 62.4% back in September, is now up to 63.0%. That's still low by the standard of the past generation, but the recent turnaround has been sharp; the gain in the past six months is the largest since the early 1990s. This suggests improvements in job conditions are finally outweighing the negative effects of retiring Boomers, easily available disability benefits, and overly generous student aid. In particular, higher wages are making work more attractive. Average hourly earnings rose 0.3% in March and are up 2.3% from a year ago. Factoring in an increase in hours worked shows that total wages rose 0.5% in March and are up 4.2% from a year ago, a healthy increase considering consumer prices are up only 1.0% in the past year. Given the slight increase in the jobless rate, some analysts and investors may be wondering how the Federal Reserve will react to today's report. We think today's report will make the Fed more likely to raise rates again by June. In the past, Fed Chief Yellen has watched the share of voluntary job leavers (or "quitters") among the unemployed as a sign of labor market strength. In March, that share hit 10.5%, the highest since the recession. The biggest negative in today's report is that the median duration of unemployment increased to 11.4 weeks from 11.2 weeks in February. A year ago, the median duration was 12.1 weeks, so we've made progress. But duration remains stubbornly high relative to prior expansions, likely reflecting weak skills among the unemployed relative to the jobs that are available. Overall, however, the job market keeps getting better and we expect that to continue. Look for another payroll gain of about 200,000 in April.
Click here for PDF version