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  Dr. Sohn's Commentary

Payroll employment for February

March 10, 2017

The economy added 235,000 jobs in February maintaining a healthy pace of job growth. The increase was widespread with only retail losing jobs. Construction as well as education and health showed sizable increases. The December and January numbers were revised up by 9,000.  The unemployment rate edged down to 4.7 percent from 4.8 percent. Wage gains rose 0.2 percent for the month amounting to 2.8 percent from a year ago vs. 2.6 percent in January.


President Trump is on his way to achieving 25 million new jobs over the next 10 years, which requires 208,000 new jobs per month. After doldrums during the fourth quarter, employment gains have picked up momentum despite the fact that the economy is hovering around full employment. The overall picture of the economy is a healthy one. Going forwardthe implementation of some of the Trump economic programs will boost employment and economic activities further.


This report will give more ammunition to the FOMC to raise the interest rate next week. The central bank could hike the interest rate as many as four times this year depending on the timing and the size of economic stimulus from the Trump Administration.


The warm weather through much of the country helped job growth in construction, for example, even though the record amount of rain in California was a negative factor.


Wage gains picked up some steam after the disappointing January data. All indications are that wages are rising at a faster pace. The tight labor market, healthy job gains and the rising quit rate all point to higher wages. In addition, higher minimum wages went into effect in many states including California and more states will follow. A more comprehensive indicator of earnings---Employment Cost Index---has been showing healthy increases in overall pay. A wage index produced by the Federal Reserve Bank of Atlanta has shown even faster wage increases than the average hourly earnings in recent months.


Surveys by NFIB also point to wage pressures as the labor market tightens. Small businesses are more comfortable about the economic outlook and has been hiring people at a good clip. NFIB surveys for the past several months have shown that hiring is the biggest problem facing them. In response to lower fuel prices, better demand and easing credit conditions, SME hiring has been a source of employment strengths and layoffs have been slowing.


The jobless rate ticked down to 4.7 percent from 4.8 percent. Labor force participation rate has ticked up to 63 percent from 62.9 percent.  The word is out that there are jobs out there and pay is going up. 

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