A key ratio relating to the jobs market recently hit record highs, which is positive for the employment outlook going forward. The ratio of job openings to hires in the private sector rose above 1.0 for the first time ever in April. This means there were more vacancies than there were hires during the month.
Friday's jobs report showed continued strength in the labor market. Payrolls increased by 252,000 in December, and the prior two months were revised up by a combined 50,000. This increased the 12-month average of gains to 246,000, the strongest reading since June 2000. In addition, the unemployment rate fell to 5.6 percent from 5.8 percent in November.
Yesterday, the Federal Reserve pledged to remain "patient" before raising interest rates, leading the Dow Jones Industrial Average to its biggest one-day gain so far in 2014. While Fed Chairwoman Janet Yellen continued to stress that the decision is "completely data-dependent," the general consensus among policymakers and market participants is that we will see the first rate hike sometime in 2015. Two of the primary determinants in the Fed's decision are currently at odds.
Friday's jobs report contained the usual amount of mixed signals, but overall demonstrated underlying strength. As for the positives:
In my post on the jobs report last week, I stated that we would have liked to have seen more evidence of wage growth. Today, I would like to spotlight a recent article in The Wall Street Journal that finds while wage gains have yet to pick up on a national level, they have begun to accelerate across key industrial states.
Friday's jobs report indicated continued improvement in the labor market, with the unemployment rate falling to 5.9 percent, a six-year low. Payrolls increased by 248,000 in September, above earlier forecasts of 215,000. In addition, the change in August's payrolls was revised upward by 38,000. With Friday's report, 2014 is on track to be the best year for total job growth since 1999, which is no doubt an impressive statistic. Despite these positives, there were also a few sore spots. The participation rate decreased 0.1 point to 62.7 percent, caused by an increase in the number of people not in the labor force, and the year-over-year growth rate in average hourly earnings fell 0.1 percent to 2 percent. In other words, while there continues to be strong gains in employment, wage growth continues to remain subdued.
Friday's employment report showed a solid 209,000 increase in payrolls. This marked the sixth consecutive month of gains over 200,000 -- the longest such streak since 1997. In addition, the prior two months of data were revised upward by a total of 15,000. Despite the gains, the unemployment rate increased slightly from 6.1 percent to 6.2 percent. This was due to an increase in the number of people re-entering the workforce, a positive sign.
Today, I would like to discuss some new developments regarding short-term unemployment, a topic I have covered in the past. My last article outlined the debate over whether short-term unemployment is a better gauge of labor market conditions than the overall unemployment rate. It appears this debate is heating up, with The Wall Street Journal reporting that it could become "an important battleground in the central bank's coming discussions about how long to continue its low-interest-rate policies."
Last Friday's jobs report was stronger than expected, with employers adding 288,000 jobs in April versus expectations of only 215,000. In addition, February and March numbers were revised upward by a combined 36,000 jobs. This, along with a sharp drop in the labor force participation rate, resulted in a 6.3 percent unemployment rate, also lower than the consensus of 6.6 percent.
The jobs report released on Friday showed that the U.S. economy added 113,000 jobs in January, much lower than the 185,000 jobs economists were expecting the nation to gain. Still, the unemployment rate moved lower to 6.6 percent, close the Federal Reserve's threshold of 6.5 percent -- where they previously stated they may begin to increase rates (but which they have subsequently shied away from).