US labour market managing to keep pace, otherwise few surprises

The April report reveals a continuous decline in unemployment in the United States: Having remained at 4.1 percent since last October, the unemployment rate has recently fallen to 3.9 percent. The spring surge in the unemployment rate was therefore somewhat stronger than expected, but this was not such a surprise in the end. After all, the number of employed persons has already risen by almost 800,000 in the first four months of this year. The fact that the April increase remained behind market expectations therefore gives only slight cause for disappointment at first glance. Another point to consider is that the initially weak March figure was revised up with the latest report.

A detailed look reveals that the US labour market not only managed to maintain its pace but that the employment momentum this year so far has even slightly exceeded that of the same period last year. This is mainly due to the new jobs created in recent months, not only in the services sector but also in industry and construction. The job engine is thus receiving a boost from almost all sectors. Nevertheless, wage growth is comparatively moderate and this is giving the US Federal Reserve scope to retain its moderately tighter monetary course.

Indeed, the robust economic conditions signal exceptionally good prospects for the US labour market. That this will not entirely be the case is due mainly to the fact that the upswing in employment is already in its eighth year. Good manpower is increasingly becoming a scarcity! Many companies referred to mounting difficulties finding qualified workers, as revealed not only in the latest business sentiment surveys. However, we continue to expect the number of jobs to steadily rise in the months ahead, with an additional boost coming from the manufacturing sector.

Nonetheless, the renaissance of US industry as an employer should not be overestimated. Despite the upward trend in employment since the end of 2016, the share of industrial employees in total employment remains almost unchanged at a historically low level. At just under 8.5 percent, the share did not decline to its current low until July 2017. Since then only a very hesitant upward trend can be noted, with a slight increase only evident in the second decimal place. Before the start of the last financial and economic crisis, one in ten people in the USA were still working in industry, even though the number of industrial employees has been on a steady downward trend since the end of the 1990s.

Employment in the manufacturing sector should also rise further in the coming months, mainly due to the good intake of orders accompanied by a correspondingly upbeat mood. Nevertheless, the importance of industrial companies as employers will only increase slightly, even if the pace of employment is higher than in the services sector, as was the case in the last two quarters. After all, we’re talking about approx. 12.7 million industrial employees compared with the impressive number of 105.5 million employees in the service sector.

 

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