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Reactions To The February 2018 Jobs Report

March 13, 2018 by Jack DeCourcy in Talent Management

The February jobs report is out and the results are consistent with analyst projections of an overall positive report. February numbers showed an unexpectedly large increase in hiring, with companies filling 313,000 new positions and unemployment holding at 4.1%.  his hiring was distributed across multiple industries with good gains in construction, retail (holding steady post-holiday) and financial services and other professional roles. The 806,000 people entering the workforce in February was one of the largest increases in 35 years.

Unemployment has stayed at just over 4% for the past five months, with job gains showing that increasingly more unemployed workers who had dropped out of the hiring process altogether are returning to the job market. This last trend has significance since the last great hiring boom in the 1990s showed a similar trend – that disenfranchised workers were getting pulled off the sidelines.  While these statistics are all indicators of a strong economy and job market, there are other factors to take into account:

1. Despite several months of steady hiring, wages remain flat,  Average wages increased by $.04 per hour with an average 2.6% over the previous year.  With inflation at 2.65% for 2017, workers are not yet getting ahead in what has traditionally been considered full employment (<5% UE).
2. While wages haven’t seen growth, neither has inflation, which many economists had been fearing would increase.
3. What impact could potential steel tariffs cause? The actual implementation of tariffs has been a moving target, but could steel tariffs have a cascading effect that slows manufacturing and construction, reversing hiring?
4. If the “full employment” trend continues, what will be required to move the needle for wage growth? While some markets and specialized skill areas are enjoying better increases, most wages are barely keeping up with inflation.

The recovery from the Great Recession has been been a long one (89 months straight of job growth) but one marked by wage stagnation. The recent tax package passed by Congress has not yet resulted in improved earnings for workers, save some sporadic bonus programs. Until labor becomes a true scarcity, wages are likely to remain flat.