Durable Sector Leading Factory Job Growth
In yet another sign that the improving global economic picture is generating some much-needed strength in U.S. manufacturing, the March U.S. Department of Labor jobs report revealed the fourth consecutive month of net new job creation in the factory sector, even as total job growth shows signs of slowing. The manufacturing employment gains since December have averaged a moderate 17,000, an impressive turn after a discouraging 2016 during which there were six months of factory sector job losses.
All of the manufacturing job growth in March came in the durables sector. Moreover, durables have provided the bulk of manufacturing job gains in three of the last four months. Chemicals, plastics, and petroleum were among the few nondurable industry sectors to create jobs during the past month. It is certainly good news for those seeking employment opportunities in U.S. manufacturing that even amidst a period of rapid process innovation greater demand still generates employment creation in most durable and certain nondurable industry sectors.
The bigger labor market picture is not as clear as it seems to be in manufacturing. With yet another fall in the unemployment rate, to the lowest level since April 2007, talk of full employment is now in full gear, most consequentially at the Federal Reserve. Fed policymakers worry about the impact of an apparently tight labor market on wages and inflation. Technically speaking, it is difficult to speak of “full employment” when there is such a low labor force participation rate and such a large pool of sidelined labor.
Yes, we have a 4.5% unemployment rate. At the same time, the employment-to-population ratio is still well shy of recovering to its pre-recession level, a strange combination that is going to require persistent research and analysis to grasp. With the rise in the participation rate being so slow, and only scattered signs of improvement, it seems clear that job creation going forward is going to be constrained by supply side forces impinging on labor availability. Some of these forces are purely economic, and some go deeper into the social realm, as revealed in recent analyses by some notable demographers and economists.
In all likelihood, the U.S. economy is in for slower job growth and higher interest rates. In the absence of significant fiscal policy stimulus, this means that overall economic growth will remain moderate. However, for once global improvement and manufacturing prospects could be an upside risk for the broad macroeconomic picture