Though the nation’s employers in February added more jobs than expected, job growth will slow this year, in what is bad news for employers and good news for employees, an economist told Insider.
The U.S. Bureau of Labor statistics on Friday said that the nation’s employers added 235,000 jobs last month, which was above expectations. The manufacturing sector gained 58,000 jobs, and manufacturing employment rose by 28,000.
“It was a very good report,” said Gus Faucher, deputy chief economist for PNC Financial Services Group.
Faucher told Insider that the unusually warm weather probably boosted the manufacturing sector, while business enthusiasm in general, possibly a lingering effect from the election of Donald Trump, prompted better-than-expected hiring.
The unemployment rate, at 4.7 percent, was down 0.2 percentage points from a year earlier, the BLS said, and the labor force participation rate, at 63 percent, rose 0.3 percentage points from a year ago. The rate, which is the percentage of the population that is either employed or unemployed (that is, either working or actively seeking work,) has increased slightly in each of the last three months.
However, the rate remains about 3 percentage points lower than it was before the recession. Faucher said that the rate may tick up in the next year, but it will not return to prerecession levels — though he said that’s a function of demographics, not economics.
Baby boomers are continuing to retire, and as they leave the labor force, subsequent generations are not replacing the retiring workers at an equal pace, he said.
While the U.S. economy last year gained 196,000 jobs per month, on average, the momentum will not continue at the same pace this year, Faucher said.
“The job market is getting tighter,” he said.
Most people who lost their jobs during the recession but had the skills and motivation to find work have done so, Faucher said.
“It is unclear how many people there are still standing on the sidelines who can come back into the workforce,” Faucher wrote in a report.
That’s bad news for employers — but good news for people who have jobs and for those who are still looking for work, he said.
Some local employers already have lamented for many months that they are struggling to find enough qualified applicants to fill open positions — though some economists have said the employers’ struggles also are a result of the spread between how much they’re willing to pay and how much potential employees expect to be paid.
Major employers including GE Appliances, Ford Motor Co. and UPS have started outreach efforts to high school students and teachers, in part to combat the legacy reputation challenges of manufacturing — poor jobs outlook, dirty environment, low-skill — to convince them that modern manufacturing can provide solid careers in clean, high-tech environments.
Faucher said the labor shortage would continue to drive up wages, which is good for people with jobs, but also for the economy in general, as it would increase disposable income and domestic spending.
Beyond paying higher wages, businesses can combat the worker shortage by lowering their standards for which applicants they automatically reject. That may involve bringing in people who lack proper skills but investing in their training or it may prompt employers to consider hiring more people with criminal records. Kentucky took steps last year to help people expunge some felony records.
Those dynamics also should help people with marginal skills, especially those who have wanted to find work in the last few years but, at least so far, have been unsuccessful, he said.
Meanwhile, Faucher said, some longer-term measures that governments can implement also would help, such as focusing on education and training to make sure employees have the skills needed for today’s economy or making it easier for employers to hire foreign workers.
The economist also said that the BLS report provides more evidence of the economy’s strength and will push the Federal Reserve to raise interest rates this week. While higher interest rates increase borrowing costs — home, auto, business loans — they also will provide people with monetary assets — retirement and savings accounts — with a greater return and reduce inflationary pressures.