Investment Insights: Nearing Full Employment?

11 March 2019

By Cliff Aque, CFA, Investment Strategist

The jobs report released on Friday, March 8 showed that February payrolls grew by 20,000 jobs, well below the estimated 180,000. This number shocked many, and rightly so, but it is still a gain, and if anything, likely points to an economy that is nearing full employment, but still has room to grow. Some reasons for the low number could be weather (construction lost 31,000 after adding 53,000 in January), and the government shutdown, which postponed some hiring and also saw furloughed employees take and then leave temporary jobs.

To smooth out the noise of the month-to-month numbers, we can look at average job growth. Over the past three months, there was an average increase of 186,000 jobs per month, and an average of 209,000 over the past twelve months. To put that into context, this was stronger than the job growth in 2017, which averaged 179,000, and in 2016, which averaged 193,000. Another part of the report that bears mentioning was the growth in hourly wages, which expanded 3.4% over the previous year, hitting another new high during this cycle:


Yet another data point pointing to full employment was a decrease in the unemployment rate by 0.2% to 3.8%. A broader measure of unemployment that includes part-time workers who would prefer full-time jobs, and those too discouraged to search for a job, declined from 8.1% to 7.3%. Part of this is due to the aforementioned furloughed government workers who left part-time jobs, but is still a dramatic drop for one month. Despite some slower economic numbers being released so far this year, this slowdown in growth appears to be temporary, and the numbers are still positive, leading us to believe that the U.S. economy has room to continue growing through 2019.