Entering text into the input field will update the search result below

U.S. Labor Market: What's Hot and What's Not

Apr. 04, 2011 8:53 AM ET
Forex Gump profile picture
Forex Gump's Blog
Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.
According to the Bureau of Labor Statistics (BLS), a net total of 216,000 people joined the U.S. labor market in March. Not only did the actual figure beat the 190,000 forecast, which was only 4,000 payrolls short of February's reading, it was also more than thrice the 63,000 increase in jobs we saw in January!

Making the report even better was the unemployment rate that printed at its lowest level in two years at 8.8%. And it doesn't end there! With the rate of joblessness falling by 0.6% in a span of just four months, analysts say that it was the fastest pace of improvement we've seen in 27 years!

Hotshots at the BLS say that almost all sectors, namely the private, government, construction, and manufacturing, stepped up hiring during the month. In fact, with more than 60% industries hiring, the private sector was able to add more than 200,000 jobs for two months in a row. FYI, we haven't seen this in more than five years!

Digging a little deeper into the report and taking a look at other measures of employment, we can see there were indeed some bright spots from Friday's release.

First, the employment-to-population ratio, which basically measures the number of working-age people who are employed, came in at 58.5%, which marked a small improvement over the previous month's figure of 58.4%. Yes, it's marginal, but at least it ain't negative!

Meanwhile, the U-6 unemployment rate fell from 15.9% to 15.7%, continuing the same trend from February. This measure includes discouraged workers (people who aren't actively looking for a job but secretly want one) and part-time workers (those who really want a job but are forced to settled for part-time work). The drop in this figure could indicate that more people were able to shift from part-time work to full-time work. Oh yeah baby, it's time to start the nine-to-five grind!

Like Shakira's hips, the numbers don't lie. Jobs growth is indeed picking up in the U.S. While increased hiring is one of the major ingredients of any economic recovery, it's the quality and sustainability of employment that really matters. So, while I hate to burst your bubble, there are still a few dark spots in the U.S. labor market.

For one thing, wage growth hasn't able to keep up with the rise in employment. Sure, companies are hiring more workers but they are keeping costs low by cutting wages. In fact, average hourly wages shrank from $19.32 to $19.30 in March.

Two cents? Pfft! That ain't much!

A couple of cents per hour might not sound like a lot, but that amounts to a 16-cent reduction in daily wages for an average Joe who works the typical eight hour shift. Assuming he works 20 weekdays a month, his monthly wage would be down by $3.20 - enough to buy a half a gallon of milk for his family!

Now that doesn't cover inflationary effects just yet. Even though average hourly wages for production workers have been rising by a mere 1% on an annualized basis since November last year, it's still lagging way behind the 4.6% year-over-year increase in consumer prices. What good is a measly uptick in wage if it doesn't even cover half as much as the increase in prices of basic goods?

If wage growth can't keep up with rising inflation, we'll definitely see a lot of penny pinching by American consumers. That could lead to weaker spending, slower production, and eventually a downturn in hiring. Yikes!

The Fed has a chance to turn this situation around if they do decide to tighten their monetary policy. While higher interest rates and lower money supply could tame inflation, these measures could also further weaken spending, production, and hiring. But that's another story and I'll save it for another article. In the meantime, we wanna know where you think the U.S. labor market is headed so make sure you vote in our poll!

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.