Jobs Report: This Is What Full Employment Looks Like

By Steven Russolillo Features Dow Jones Newswires

The economy could use a dose of good news. Friday's jobs report should do the trick.

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Weak economic growth, shrinking auto sales and slowing manufacturing activity haven't offered much to celebrate of late. Even the pace of hiring has taken a hit. But the string of disappointments is likely to come to a halt in the Labor Department's April jobs report.

Economists polled by The Wall Street Journal estimate that nonfarm payrolls increased 188,000 last month, compared with March's weather-related slowdown when only 98,000 jobs were added. That marked only the sixth time in the past five years in which fewer than 100,000 net jobs were added in a given month. In each case, hiring bounced back. This time should be no different.

For instance, only 43,000 jobs were added last May, at the time fanning fears of a hiring slowdown. And yet, an average of 255,000 jobs were added over the following three months. Similar trends followed disappointing monthly reports for March 2015 and December 2013. The last time fewer than 100,000 jobs were added in back-to-back months was six-and-a-half years ago, early in the recovery.

Other indicators point to improving employment trends. Jobless claims fell again last week to one of the lowest levels since the 1970s. U.S. employers announced 15% fewer job cuts in April than a year ago, according to Challenger, Gray & Christmas. And LinkedIn's own employment report showed April was the best month for hiring since June 2015.

While the expected rebound should be refreshing, the longer-term trend suggests more modest job growth is likely here to stay. That isn't a bad thing, necessarily, but rather a reflection of the labor market getting closer to full employment -- the point at which nearly everyone who wants a job has one. In 2014, the economy added an average of 250,000 jobs a month. That average slipped to 226,000 in 2015, 187,000 last year and 178,000 through the first three months of this year.

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Given that pattern, a further slowdown is unlikely to deter Federal Reserve officials who this week suggested that they still expect to raise interest rates two more times this year. Assuming a steady labor-force participation rate, the economy would need to add just 120,000 jobs a month over the next year to keep the unemployment rate steady at 4.5%, according to the Federal Reserve Bank of Atlanta. If the first-quarter average of 178,000 monthly gains is maintained over the next 12 months, the unemployment rate would fall to 4.1%, the lowest since December 2000.

A few economic bumps notwithstanding, there is little to fear in the labor market.

Write to Steven Russolillo at steven.russolillo@wsj.com

(END) Dow Jones Newswires

May 04, 2017 17:32 ET (21:32 GMT)