Economy
May 9, 2017
Net Job Creation by Industry through April 2017
Written by Peter Wright
The US Gross Domestic Product is the values of goods and services produced by all economic activity. The growth of GDP is a function of the growth in the number of employed people multiplied by the growth of their productivity. Steel consumption is correlated to GDP, therefore to understand the direction of the steel market it is useful to know more about the growth in employment. The Bureau of Labor Statistics (BLS) monthly report of net job creation presents the big picture and also enables us to drill down into sub sectors such as manufacturing and construction. This is therefore valuable in understanding the drivers of our particular steel business.
The BLS net job creation report released on Friday was another example of why we should not be fixated on a single month’s result. Month on month there was an encouraging increase following March’s poor result. March was revised down from 98,000 to 79,000 and February was revised up from 219,000 to 232,000. The April number was 211,000 with a three month moving average (3MMA) of 174,000 which was actually down from March’s 3MMA of 176,000. Clearly the single month number is useless in its ability to measure the trend. The average monthly increase in the 12 months of May 2016 through April of 2017 was 186,000. Moody’s reported that U.S. job growth rebounded in April, highlighting that the weakness in March was attributed to transitory factors. Employment rose by 211,000 which was better than either we or the consensus anticipated. Private employment increased 194,000 in April with the bulk of the growth in professional/business services, leisure/hospitality and education/healthcare. The unemployment rate fell from 4.5 percent to 4.4 percent, matching its lowest since 2006. The unemployment rate fell for the wrong reason as the labor force participation rate slipped and those not in the labor force rose. Still, the lower unemployment rate will likely fan fears within the Fed that the labor market could begin to overheat. Average hourly earnings for all private workers rose 0.3 percent. If the economy isn’t at full employment it is close.
