CBO: Jobless Rate To Fall & Wages To Rise Through 2018
1. January Unemployment Report Stronger Than Expected
2. Skilled Workers Are Scarce in Tight Labor Market
3. CBO Report: Unemployment Rate to Fall Through 2018
4. Fed Leaves Rates Unchanged at First Meeting of 2017
A new report from the Congressional Budget Office (CBO) predicts that the US unemployment rate will continue to fall through 2018. The same study predicts that growth in hourly wages will increase significantly this year and next. I’ll give you the details on this uplifting report as we go along today.
But first let’s take a close look at last Friday’s better than expected unemployment report for January, where new jobs were much higher than expected. On a related note, we’ll look at new data showing that skilled workers are getting harder and harder for employers to find.
Finally, I’ll summarize the news from the Fed’s first policy meeting of the new year, which was held last Tuesday and Wednesday. While the Fed left rates unchanged, it still anticipates several rate hikes later this year.
January Unemployment Report Stronger Than Expected
The Commerce Department’s Bureau of Labor Statistics (BLS) reported on Friday that the US added a net 227,000 new jobs in January, well ahead of the pre-report consensus of 175,000, and the strongest showing in four months.
The headline U-3 unemployment rate ticked up slightly to 4.8% as more Americans returned to the workforce last month. The more encompassing U-6 measure of unemployment – which includes those who want to work but haven’t looked in the last month and those working part-time because they can’t find full-time jobs – rose two-tenths to 9.4%.
The Labor Force Participation Rate rose better than expected to 62.9% in January, the highest level since September, as about 700,000 Americans returned to the workforce last month. Working age Americans not in the labor force declined to 94.4 million, down from 95.1 million in December. Yet the participation rate remains at levels not seen since the late 1970s.
The other good news in the report was that full-time jobs surged, climbing by 457,000 to 124.7 million, while part-time positions plunged by 490,000 to 27.4 million. Job creation was strongest in retail, with 46,000 positions added despite the end of the holiday shopping season. Construction gained 36,000, financial activities were up 32,000 and professional and technical services saw a 23,000 gain. Bars and restaurants contributed 30,000 to the total, while health care added 18,000.
The bad news in the January report was in the numbers for wage growth. Average hourly pay rose at an average annual rate of only 2.5% last month, below the pre-report expectation of a gain to 2.7%. In January, average hourly earnings for all employees on private nonfarm payrolls rose by 3 cents to $26.00, following the 6 cents increase in December.
The slower wage growth came even though worker pay got a boost last month because minimum wage increases kicked in on January 1 in 19 states. In California, for example, the minimum wage rose to $10.50 an hour from $10 last year.