March 2017 Jobs Report
Unemployment Drops as Job Gains Slow
Monday, April 10, 2017
January’s job-gain figure of 238,000 was revised down to 216,000, while February’s was revised down from 235,000 to 219,000 -- a net decrease of 38,000 jobs during the previous two months. March’s monthly number was the lowest monthly rate since May 2016 and was well below the average monthly gain for the previous 12 months of 182,000.
Annual job growth remained moderate, dipping to 1.5%, down 0.4 percentage points from March 2016. Annual job gains were 2.185 million, 558,000 less than March 2016’s total and 127,000 less than February’s annual rate.
Average hourly earnings (wages) for privately-employed workers continued to rise, coming in at 2.7% on an annual basis in March, a slight decrease from February’s 2.8%, but right at the 12-month average. The average from April 2015-March 2016 was only 2.4%.
The U3 or “official” unemployment rate of 4.5% in March was down from 5.0% in March 2016. The civilian labor force participation rate held steady at 63.0%, the same rate as March 2016. The employment-population ratio increased by 10 basis points (bps), to 60.1%.
The number of part-time workers for economic reasons decreased by 151,000 from last month and is down by 567,000 from March 2016. The U6 unemployment rate, which includes these part-timers and marginally attached workers, decreased nearly one full percentage point to 8.9% from last March.
In addition, the number of long-term unemployed (27 weeks or more) decreased by 114,000 from February, and was 526,000 lower than March 2016. The number of multiple jobholders increased by 545,000 from March 2016 to 8.1 million, but the number of discouraged workers not in the workforce (460,000) decreased by 125,000 from one year ago.
The not seasonally adjusted unemployment rate for the oil and gas extraction industry plunged to 4.6% in March from 9.8% in 2016. In fact, the unemployment rate for all major industry classifications fell from last year, with the exception of Transportation & Utilities:
The Professional & Business Services (+56,000) sector dominated all industries in job gains for March. Three other industries gained at least 10,000 jobs: Education & Health Services (+16,000), Mining & Logging (+11,000), and Manufacturing (+11,000).
Growth Slowing in Almost All Top Metros
The nine metropolitan areas adding the most jobs in the 12 months ending in February (the latest metro-area figures available) were the same as they were in January, though several changed positions.
New York again was No. 1, with Atlanta displacing Dallas at No. 2, as Big D dropped to No. 3. Los Angeles returned to the No. 4 spot and Orlando moved up one to No. 5. Washington, DC vaulted from No. 9 to No. 6 and Phoenix improved to No. 7, as Riverside returned to the top 10 at No. 8. Seattle slid from No. 7 to No. 9 while Boston plunged from No. 5 to No. 10 in February. Tampa fell out of the top 10 from No. 10 to No. 13.
Together, the total jobs created in the 12 months ending in February for the top 10 metros were down 3.4% from the annual total in January (659,500 vs. 682,500) and down 18.1% from the 12-month total for February 2017 (659,500 vs. 805,700).
A few metros dropped sharply in the rankings: Austin fell from No. 14 to No. 22, Miami fell to No. 30 from No. 15, and Oakland fell from No. 23 to No. 31. However, a few metros moved up in the rankings from last month: Chicago jumped from No. 26 to No. 11, Minneapolis moved from No. 20 to No. 15, and St. Louis rose from No. 41 to No. 27.
Annual job growth slowed in all but one of the top 10 markets in February:
Job growth was up in:
Milwaukee, WI is still reeling from layoffs at JP Morgan Chase, Northwestern Mutual, Caterpillar and Harley-Davidson, while Bridgeport, CT is dealing with the closing of the Sikorsky facility. The Lake County-Kenosha County metro division saw deep cuts in the Professional & Business Services (-3,000) and Leisure & Hospitality (-3,200) industries. Continuing Manufacturing sector losses in Tulsa are causing retrenchment in the retail trade and food services and drinking establishments subsectors. Oklahoma City is another energy metro with losses attributed to Mining & Logging and Manufacturing feeding losses in Professional and Business Services and Leisure & Hospitality.
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Job Growth Revisions Help Tell the Story
Every March, the Bureau of Labor Statistics releases its revised estimates of employment gains at the national, state, and metro levels to reflect the incorporation of the 2016 benchmarks and the recalculation of seasonal adjustment factors. Because job growth is the key demand-side variable in apartment market performance, the magnitude and direction of changes in this indicator tell us a lot about what to expect in terms of rent growth and occupancy rates. These revisions often help explain puzzling or unexpected market trends.
In some markets, the latest revisions substantially alter our impression of the overall health of a given metro area. Metros such as Atlanta, Austin, Miami, Nashville and San Francisco boasted job-gain revisions that point toward a much stronger market than originally thought.
On the other hand, metros such as Denver, Houston, San Jose, Seattle and Washington, DC featured job-gain revisions that suggest a weaker market than initially thought.
Plotting metro-level job growth (pre- and post-revisions) against Axiometrics’ year-over-year rent growth values helps, in some cases, to explain some of the rent growth changes over the last two years.
Take Denver as an example. Between summer 2015 and early 2016, rent growth in Denver fell by nearly 800 basis points, followed by a brief period of stability before sliding again in the summer of 2016. Meanwhile, job growth closely tracked rent growth until late 2015 before slowly growing again through most of 2016. The twin stories of moderating rent growth and advancing job growth didn’t make much sense.
However, with the latest BLS revisions, the story is starting to cohere: Job growth was on a declining trajectory starting in summer 2015 — around the same time as rent growth began its downward trajectory.
On the other side, take a market like Austin, where the latest revisions seem to contradict our impression of the market’s health. Austin rent-growth rates have been in freefall since January 2016.
The pre-revised job growth numbers appeared to confirm the reality of a market in distress, with a very sharp moderating trend appearing in summer 2016. Unlike Denver, the revised job numbers in Austin at least share a similar trend with the pre-revised numbers; nevertheless, the contraction in job growth was not nearly as severe as we thought.
There must be a cause for the declining rent growth outside of a decline in demand (job growth) that was virtually revised away. The simple answer is supply. Adding the ratio of annual new supply to the inventory base moving monthly shows that inventory growth has remained in the 5% range through late 2016 while demand slowed only slightly. This put downward pressure on rent growth as seen in the data.
As proof of this, we return to Denver. Rent growth declined beginning in early 2015 as both job growth (demand) declined and inventory growth (supply) edged up. While revised job growth has continued to slow in the Mile High City, rent growth has somewhat stabilized as inventory growth has slowed as well.
Key demand and supply drivers both help tell the story of an apartment market’s performance. Revised or updated data can change the narrative or explain unexpected results.
By the Numbers
The following table shows February 2017 (the latest data available) metropolitan-area job gain and job growth, some grouped by state or region.