HIRE POWER

Weird things happen when you approach full employment

At first, the latest US jobs report looks bad.

How bad? Employers added 98,000 jobs in March, well below the 180,000 analysts were expecting. As an added insult to Donald Trump, who promised to be “the greatest jobs president God ever created,” statisticians also revised down the numbers for earlier months, making them look less robust than first reported.

Now they say that 216,000 jobs were added in January, not 238,000 as reported before. February was revised down to 219,000, from 235,000.

Look past the ugly headline numbers, though, and something good is happening. Mostly notably, the unemployment rate dropped to 4.5% in March, from 4.7% in February, the lowest rate recorded in a decade.

Last month, the Federal Reserve raised interest rates for the second time in three months, which was a big deal for the notoriously dovish policymakers. The central bank reasoned that the US was near “maximum employment,” meeting one of its mandates.

The Fed has no fixed target for what full employment means, exactly, and instead considers a combination of factors. Last month, officials estimated that the natural long-term rate of unemployment ranged between 4.5 and 5%. The historically low jobless rate suggests the US is already at full employment (pdf), according to analysts at Commerzbank.

Today’s report supports the full-employment hypothesis—as a result, there may be fewer jobs added each month as the labor market tightens as far as it can go. In October, the San Francisco Fed said the US economy now only needs to add about 75,000 jobs a month, and possibly as few as 50,000, to keep the economy on an even keel.

With less slack in the labor market, the focus will turn to wages, which should rise as workers gain more bargaining power. In March, year-over-year wage growth was 2.7%, slightly lower than February but much higher than the 2016 average of 2.3%.

These silver linings in what at first looked like a scary report have heartened the markets. The S&P 500 stock index opened flat and the dollar erased its initial losses against other major currencies.

It’s also important to note that weather can have a big impact on month-to-month jobs numbers. In March, a major winter storm hammered the Northeast during the time the Labor Department conducted its surveys of hiring for the month. By comparison, February was unseasonably warm. This was a major factor in the surprisingly low payrolls figure for March, according to most analysts.

In March, there were 164,000 people not at work because of bad weather, compared with 157,000 the previous month. What’s more, the number of people working part-time instead of full-time due to bad weather increased to 3.1 million, from 606,000 in February.

The big story of the March jobs report, though, is that the US economy is approaching the point at which a large share of people who want a job are able to get one. In that situation, a rare one in recent history, weaker-than-usual job growth can even be considered a good sign.

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