Executive Summary:
- The U.S. economy added 211,000 jobs in April while the unemployment rate fell to 4.4 percent, according to data released today by the Bureau of Labor Statistics. The unemployment rate is now at its lowest point since May 2007, which was also the lowest it reached during the prior expansion. After revisions, the first quarter showed 6,000 job losses, and monthly additions have averaged 185,000 so far this year, nearly matching the pace of growth in 2016. Job numbers for the first three months of this year were affected by weather and seasonal patterns, particularly the Easter holiday. Easter came at the end of the April survey week, which impacted retail and hospitality employment in March and set the table for a strong rebound in April, particularly in the hospitality sector, which added 55,000 jobs. About half of the increases in hospitality jobs were in restaurants and drinking establishments.
- Job growth among young adults has increased by 2.8 percent year over year, the second strongest gain over the past 20 months. Job growth for young adults is critical for household formation and consequently the housing market.
- Several points in the report are also encouraging for the job market going forward. Job gains were broad-based across a number of industries, and the quality of the jobs has improved. Recent months have shown increasing additions of full-time jobs and fewer additions of part-time positions. Also, hourly earnings continue to rise, albeit slowly, and wages are now 2.5 percent higher than they were last year. However, a tight job market suggests that more pressure on wages is likely this year.
- Employment growth was again led by the professional and business services sector, though April’s gain was slightly lower than the average recorded in April 2016. Industries that saw relatively higher April gains when compared with last year include local government, entertainment and recreation, financial services, mining and logging, and a few others. Construction employment has slowed, but seasonal effects could be driving that change. The construction industry has also faced challenges finding qualified labor.
- The unemployment rate decline to 4.4 percent reflects a greater increase in household employment than it does labor-force growth. And while the overall labor-force participation rate continues to fluctuate at a low 63 percent due to retiring baby boomers, the participation rate for prime-age workers — those ages 25 to 54 — has been solidly growing and reached 81.7 percent in April. More full-time jobs are helping to draw people back into the workforce.
- Strong employment numbers suggest that anticipated interest-rate hikes by the Federal Reserve are likely, with the next one expected in June. Generally, the increase in interest rates will remain gradual, and the June hike should not be more than 25 basis points. In addition to higher rates, tight job market conditions and wage growth will likely continue to push up inflation rates.
- In a separate report by the CompTIA IT Employment Tracker, the IT sector lost an estimated 3,000 positions in April. Job losses were mostly concentrated in telecommunications (down 5,300 positions) and computer and electronic-products manufacturing (down 1,700 jobs). IT services and customer-software design created 2,600 positions. Other information services to record gains were service portals (up 800 jobs) and data processing, hosting, and related services (up 600 jobs). So far, 2017 has been best for IT services and software, while the telecommunications industry has seen the biggest loss. On the other hand, the second component of the nation’s IT sector, which includes occupations in all other industries, added 90,000 jobs in April after three months of declines. Job openings for core IT positions remained unchanged in April, with the highest demand for software developers.
Selma Hepp is Pacific Union’s Chief Economist and Vice President of Business Intelligence. Her previous positions include Chief Economist at Trulia, senior economist for the California Association of Realtors, and economist and manager of public policy and homeownership at the National Association of Realtors. She holds a Master of Arts in Economics from the State University of New York (SUNY), Buffalo, and a Ph.D. in Urban and Regional Planning and Design from the University of Maryland.
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