Another Good Jobs Report Suggests Healthy Economy
Guest blog by Dr. Tom Cunningham, Economist and MST Advisor
The first Friday of February saw another positive jobs report: 227,000 new jobs in January, well above expectations of around 175,000. The headline unemployment rate (U3) ticked up to 4.8 percent, but that was largely due to an increase in the labor force participation rate. The broader measure of labor underutilization (U6), which includes part-time workers who want full-time work and discouraged but available workers, ticked up as well, to 9.4 percent. Revisions to the previous two months’ jobs numbers were mixed, with a net revision down of 39,000. Average hourly earnings were reported up 2.5 percent year-over-year.
Many of the new jobs fall into the category of lower-paying, low-skill positions, including 76,000 retail and restaurant jobs added in January. But the U.S. economy also gained good-paying jobs, including 32,000 new workers in financial services. Construction added 36,000 workers and health care gained 18,000 jobs.
Jobs continue to increase at a faster rate than the underlying population growth would support, the difference being made up by people re-entering the labor force. Those returning workers are keeping wage growth from accelerating rapidly, though wages are increasing at a respectable rate.
While there is considerable uncertainty about how the economy is going to respond to our new government’s policies, the administration is inheriting a labor market in good shape. Evidence from the jobs numbers suggests that growth keeps chugging along – at a decent if not spectacular pace.
About the Author
Tom Cunningham holds a Ph.D. in economics from Columbia University and was senior economist with the Federal Reserve Bank of Atlanta from 1985 to 2015. Mr. Cunningham serves as a consultant to MST in the creation and ongoing development of the MST Virtual Economist and is the MST Advisory economics specialist. Tom will be a featured speaker at the 2017 National ALLL Conference in May.
Why should lenders consider the monthly jobs report?
As employment is a key factor in projecting loan portfolio performance, current employment statistics and longer term trends are likely to be primary considerations for most banks and credit unions as they incorporate forward-looking economic factors in their ALLL estimations under the CECL accounting standard.
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