March employment figures tell us that the economy is (still) well

The numbers on new jobs released Friday are not spectacular by the standards of the past two years. But they also mean a sigh of relief.

Low job growth in February seemed to be the best evidence of the slowdown in the US economy and perhaps even the end of its expansion. The Department of Labor initially reported that employers had created only 20,000 jobs during this month. Even after further revisions, this number was only 33,000.

The number of March – 196,000 posts added last month – shows that February was an aberration and not a trend. Despite all the fluctuations in the financial markets and the pessimistic comments of the end of last year, the formidable machine to create American jobs is still buzzing.

Over the last six months, the economy has generated an average of 207,000 new jobs per month, which is actually better than the 2017 results and slightly lower than the 2018 rates.

But even if the numbers give confidence that the economy will not collapse, there is nothing that will allow the Federal Reserve to reconsider its approach to interest rates.

Average hourly earnings increased only 0.1% in March and increased 3.2% over the past year. Inflation is low enough that it represents an increase in the incomes of American workers. But this is hardly an epidemic of inflation that the Fed will feel obliged to stop with a rise in interest rates.

The Fed, which has decided to postpone interest rate increases indefinitely, is feeling more and more comfortable with a tight labor market and unemployment rates that previously would have been seen as a precursor to overheating. With a rate of 3.8% in March, the unemployment rate was less than or equal to 4% for a full year.

The stable unemployment rate in March masked the negative trends in the proportion of Americans looking for work. The labor force participation rate decreased by 0.2 percentage points and the ratio of the active adult population decreased by 0.1%.

This is probably a statistical aberration, but taken literally, it means that progress in attracting more Americans to the labor market has not been as consistent and compelling as it seemed .

Combined with other significant data – such as surveys of business activity and retail sales – the latest labor market readings confirm the idea that it is safe to say that it is a good business. is a resilient economy. In December, a strong sell-off in the stock market coincided with a rise in pessimism in corporate surveys.

The report recalls that although growth was slowing in 2019, as forecasters predict, a slowdown is not the same as a recession, and certainly not the same as a collapse. Up to now, worrying signs of the economy – such as long-term interest rates falling below some short-term rates, poor retail sales ratios in December and on the labor market in February – is not a cause for panic.

In other words, as long as employers ignore the latest financial market fluctuations and make their hiring and investment decisions based on the demand for their products (which is solid) and the availability of credit (this which is easy), this expansion should be able to be completed. again.