TODAY WE ARE TALKING ABOUT THE APRIL JOBS REPORT. WHAT DID WE LEARN ON FRIDAY?
The economy continues to be strong, and companies are continuing to hire workers. According to the Bureau of Labor Statistic report last week, the economy added 164,000 new jobs last month, and the unemployment rate dropped to 3.9%, the lowest rate we have seen in 18 years. This is great news, but there were some mixed signals in the report on Friday, which I also want to highlight.
LET’S START WITH THE GOOD NEWS FROM THE REPORT; UNEMPLOYMENT IS THE LOWEST IT HAS BEEN IN NEARLY TWO DECADES. WHAT IS DRIVING THIS?
Put simply, companies are confident about the economy and their future, and as a result they are hiring. Whether you look at the white collar professional services sector, the healthcare sector or the construction industry, job growth has been the name of the game in recent years. In fact, April was the 91st straight month the US economy added jobs.
And economists expect it to continue. A Wall Street Journal article noted that we are likely to see the unemployment rate continue to trend downward in the months ahead. Currently the Fed is forecasting a 3.6% rate next year as the labor market continues to tighten.
YOU NOTED THERE WERE SOME MIXED SIGNALS. WHAT WERE THEY?
While we certainly cannot complain about a positive jobs report, there are some signals that the pace of job growth is slowing. April’s 164,000 jobs number was well below the 191,000 the economy averaged over the past year. This could be due to a couple of factors. First, companies are simply struggling to find workers. It could also be a result of employers seeing more uncertainty in the future, as concerns of trade tensions with China, rising operating costs and interest rates are considered. Indeed, hiring in the manufacturing sector has slowed since President Trump has ramped up his rhetoric concerning trade.
Beyond the pace of hiring, we are still not seeing wages grow as fast as expected. Last month, wage rose 2.6% from a year earlier, extending a stretch of sluggish growth that many had hoped would come to an end as the labor market tightened. The last time unemployment was this low, it forced employers to raise wages as they worked to attract and retain worker, and wage growth was 4.4% year over year. We have not really seen that recently, and that continues to be a point of concern.
WHAT IS BEHIND THIS SLOW WAGE GROWTH, MELLODY?
That is a great question, SKIP, and there are a number of things people have attributed it to. One of the prime culprits is the labor force participation rate. In 2000, the labor force participation rate was just over 67%. It has been falling ever since, most sharply in the wake of the Great Recession. Many of those people who had stopped looking for work for several years are now returning to the work force, sometimes for lower wages due to the large unemployment span, which may be keeping wage growth low. Economists have also pointed to the decline of union and the rise of the gig economy as factors. And finally, some companies have become accustomed to giving smaller raises in recent year.
WE HAVE SEEN A LOT OF TALK FROM SOME FIGURES ABOUT THE UNEMPLOYMENT RATE FOR MINORITIES. WHAT DID THIS REPORT TELL US?
While the President and others have definitely touted the unemployment rate for Black workers – currently at 6.6% in April, the lowest level on record – it is still considerably higher than other cohorts. Last month, it was nearly double the unemployment rate for whites – 3.6% – and higher than the 4.8% among Hispanics. So clearly there is still room for improvement.
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Mellody Hobson is President of Ariel Investments, a Chicago-based money management firm that serves individual investors and retirement plans through its no-load mutual funds and separate accounts. Additionally, she is a regular financial contributor and analyst for CBS News.