Why average hourly earnings in the US disappointed analysts

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The Bureau of Labor and Statistics household survey

The employment situation summary is a set of labor market indicators based on two separate surveys in this one report. For March 2014, the household survey did produce some positive statistics. However, with the unemployment rate holding steady at 6.7% average hourly earnings remaining unchanged, investors might not be that enthusiastic about the improved performance of the labor market.

BLS report March 2014

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Industrial companies, as major contributors to the job market, are greatly affected by employment statistics. Industrial ETFs like the SPDR Industrial Select Sector Fund (XLI), which has companies like General Electric Co. (GE) and Boeing Co. (BA) in its portfolio, the Vanguard Industrials Index Fund (VIS), and the iShares Dow Jones US Industrial Sector Index Fund (IYJ) serve as a good indicator of the industrial sector.

Household survey highlights

Job growth is improving, but not quite as much as forecast. Total non-farm payroll jobs rose 192,000 in March after a 197,000 boost in February and a 144,000 increase in January. The Bureau of Labor Statistics also revised last month’s report up from 175,000 to 197,000 jobs. The unemployment rate held steady at 6.7%. Other key statistics from the household survey included the following.

  • The number of people employed as a share of the working-age population increased to 58.9%—the highest since August 2009.
  • The number of long-term unemployed—those jobless for 27 weeks or more—decreased by approximately 100,000 in March to 3.7 million, accounting for 35.8% of the unemployed. The number of long-term unemployed people has dropped 837,000 since March 2013, in part because of the shrinking labor participation rate.
  • The labor force participation rate rose slightly, to 63.2% in March, compared to 63% in February as more people searched for jobs while winter ended.

Establishment survey highlights

The establishment survey, used to calculate the average number of hours worked each week as well as the average compensation earned by employees during those hours, showed that the private sector generated 192,000 jobs after a rise of 188,000 in February. Other key statistics from the establishment survey included the following.

  • Average weekly hours improved to 34.5 hours from 34.3 hours in February, possibly reflecting a bounce-back from the impact of adverse weather.
  • Average hourly earnings were flat in March after a spike of 0.4% in February. The report showed hourly earnings were little changed, at $24.30 an hour on average compared to $24.31 an hour in February.

The only disappointment from the establishment survey was that average hourly earnings remained unchanged.

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