It’s time to be real: the US economic expansion isn’t ending anytime soon.
At the start of this year you couldn’t go a day without hearing someone call for a recession.
People pointed to weakness in the manufacturing sector centered around the crash in oil prices as a place of stress that could spill into the broader economy.
But the manufacturing sector has been in recession for months and regional data indicate that the sector has reached a turning point.
Meanwhile, data on the US labour market continues to make clear that Americans are finding work, keeping work, and getting paid more for that work.
Top-line US GDP growth might not be blowing anyone away, the economy continues to grow — even if only modestly — and the central question for markets, as always, is: are things getting better or getting worse?
And Friday’s jobs report makes it clear things are still getting better in the US economy.
On Friday, the March jobs report beat expectations on top-line jobs gains, wage growth, while the participation rate increased and the unemployment ticked up slightly.
Non-farm payrolls grew by 215,000, year-over-year wage growth rose to 2.3%, the labour force participation rate rose for the fourth straight month to 63%, while the unemployment rate rose to 5% from a post-crisis low of 4.9%.
“If the participation rate is rising and unemployment basically holding around NAIRU, it gets me really bullish on how long this cycle can go,” Neil Dutta at Renaissance Macro wrote in an email following Friday’s report.
“If you thought recession was a 1 in 3 proposition, you should be scaling it back now.”
Looking into the internals of the report, the most important age cohorts saw the bulk of the job gains.
Workers between 25 and 54 — also known as “prime age” workers — gained 196,000 jobs in March, the vast majority of the 215,000 jobs that were added in total.
Additionally, 2,000 fewer workers 55 and older were employed in the month, an encouraging sign as these are the workers you expect to retire and leave the workforce, making way for a new crop of prime age workers.
Meanwhile, labour market flows continue to be positive as the number of workers moving from out of the workforce entirely into having a job remains near a post-crisis high, indicating that the rise in the participation rate is about bringing workers who were previously entirely detached back into the workforce.
Construction jobs are also starting to regain share as a per cent of total employment, but there is still a very long way to go and a lot of room to run for these jobs.
But the big takeaway from Friday’s report is that jobs are returning to the workers that become the consumers who drive the economy forward.
Workers between 25 and 54 are going buy homes, have families, and drive the next leg of economic growth.
You can look at history which tells you normal business cycles last seven years, notice that we’re in the seventh year of an expansion, and conclude that therefore we must be due for a recession soon.
Or you can look at the data, appreciate the depth of the post-crisis recession, and concede that the old adage “expansions don’t die of old age” is actually true — they die when people stop getting jobs.