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Economic Watch: Employment Jumps, Manufacturing Awakens

April 1, 2016

By Evan Lockridge

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The number of jobs added in March grew by another healthy pace, but not in trucking, while the nation’s manufacturing sector ended months of declining factory activity and overall construction fell slightly in February, according to the latest economic reports released Friday.

There were 215,000 non-farm jobs added, according to the Labor Department, better than a consensus forecast from economists.

Job gains for February were revised slightly higher but January was a little lower, resulting in just 1,000 less jobs than initially reported over the two months. Over the past three months, job gains have averaged 209,000 per month.

Despite this latest increase, the nation’s unemployment rate inched higher to 5% from 4.9%, its first hike since last May, as the labor force participation rate hit its highest level since 2014.

Employment gains occurred in the retail trade, construction, and health care sectors while job losses were mainly in manufacturing and mining, according to the department.

The for-hire trucking industry shed 2,400 jobs in March from the month before while the wider transportation and warehousing sector showed a net loss of 2,500, as there was increased employment in other parts of this segment. This follows a loss of 600 trucking jobs in February, first reported as a decline of 900.

Although down slightly from February the pace of overall March employment growth was still solid, even with the modest unemployment rate increase in March, and the underlying slow pace of growth in the working age population, according to Nathan Janzen, senior economist at RBC Economics.

“Indications of strengthening in both wage growth and a rebound in hours worked point to, on balance, stronger household income growth than a month earlier,” he said. “We expect these trends, somewhat slower employment growth but also tighter labor markets and higher wages, to broadly continue going forward which will continue to provide support to household incomes and consumer spending.”

Manufacturing Sees A Return To Expansion

Meantime, two separate reports on the nation’s manufacturing sector indicate a slight improvement in overall conditions for March.

Economic activity in the manufacturing expanded for the first time in the last six months, according to a survey of the nation’s purchasing executives by the Institute for Supply Management.

Its Purchasing Managers’ Index registered 51.8%, an increase of 2.3 percentage points from the February reading of 49.5%, as 12 of 18 industries reported sector growth and 13 of 18 industries reported an increase in new orders.

A reading above 50% indicates manufacturing is expanding while a figure below 50% shows contraction.

Strong gains were reported in ISM’s measure of new orders and production, with a slight decrease in manufacturing employment for March.

A separate report on the manufacturing sector from the financial information services provider Markit also showed sustained growth across the U.S. manufacturing sector, but the overall pace of expansion remained subdued.

At 51.5, up only slightly from 51.3 in February, the seasonally adjusted final U.S. Manufacturing Purchasing Managers’ Index, showed another modest improvement. The preliminary reading released earlier for March was 51.4.

Like the ISM index, a reading above 50 is generally regarded as showing an expansion in manufacturing.

Despite the improvement, the average headline reading for first quarter as a whole, 51.7, pointed to the weakest quarterly upturn since the third quarter of 2012.

A faster increase in incoming new work and sustained growth of employment numbers were the main positive developments recorded by the survey during March, according to the report. The data also pointed to stabilization in new export orders, following a slight fall in February. Manufacturers noted that generally improving global economic conditions had helped to offset some of the negative influence on export sales from the strong dollar.

Despite a slightly sharper rise in new work, manufacturing output growth was unchanged from the 28-month low recorded during February. Moreover, output growth remained below its post-crisis trend and close to its lowest since late-2012.

“Subdued client spending patterns within the energy sector, ongoing pressure from the strong dollar, and general uncertainty about the business outlook were cited as factors weighing on new order flows in March,” said Tim Moore, senior economist at Markit.

These numbers follow a story from Bloomberg earlier in the week that a recent recession in U.S. manufacturing may be over.

Construction Posts A Slight Retreat

In another report, the U.S. Commerce Department announced total construction spending in the U.S. fell 0.5% in February from January’s revised 1.5% increase from the month before, the largest decline in three months and worse than many analysts expected.

Despite the month-to-month decline, the February level is 10.3% higher than the same time a year earlier. During the first 2 months of this year, construction spending was 11.2% above the amount for the same period in 2015.

February’s drop was due to a 1.3% drop in the construction of factories, communication facilities and other nonresidential projects while sending on government projects fell 1.7%, which offset a 0.9% rise in new home construction, which remains at its highest level in several years.

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