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Solid Jobs Growth Points to US Economic Health

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Sep. 1 2020, Updated 12:08 p.m. ET

The BlackRock U.S. Employment Index—our gauge of 10 key labor market indicators—has risen back to pre-crisis levels. All of the index’s subcomponents have turned positive this year, as the chart below shows.

In addition, April’s payroll report reaffirmed the strong, and generally consistent, run in payroll growth that weak March figures had seemingly called into question. More jobs have been created over the past 24 months than over the 13 years previous to that combined. Jobs growth has been pretty steady (despite a March blip)—and given the April rebound in payrolls, it’s hard to see this trend changing any time soon. In fact, the last time that 12-month non-farm payrolls job growth was as strong as it is today, the early 2000s, the Fed’s policy rate stood near 6% (versus effectively zero today).

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Market Realist – Solid jobs growth points to a robust US economy

The above graph charts BlackRock’s US Employment index from 2005–2015. As illustrated above, all indicators have been positive in 2015 and are in touching distance of the levels seen prior to the US financial crisis of 2008 .

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The above graph shows additions to non-farm payrolls over the past year. The US economy rebounded in April and made 223,000 additions to non-farm payrolls in the month. The March estimate was revised downward from 126,000 to 85,000 by the Bureau of Labor Statistics (or BLS).

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The BLS estimates that the April gains in jobs came from the professional and business services, healthcare , and construction sectors, adding 62,000, 45,000, and 45,000 jobs, respectively. The mining sector, which has been suffering due to the slump in the energy sector , lost 15,000 jobs in April. The job losses include 10,000 jobs in mining activities and 3,000 in oil and gas extraction.

The labor force participation rate notched up by 0.1%, increasing to 62.8% in April.

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The unemployment rate ticked downward from 5.5% to a seven-year low of 5.4% in April—largely in line with the Federal Reserve’s estimates. The U-6 unemployment rate (including all marginally attached workers and total employed part time for economic reasons) has been declining faster than the headline rate, indicating strength in the labor market. The U-6 unemployment rate came in at 10.8% in April, much lower than the 11.3% estimated for January 2015.

John Williams, president and CEO of the San Francisco Federal Reserve, recently endorsed the strength in the labor market. During an interview on CNBC, he noted that the recent jobs data show “good momentum” for 2015. Solid employment growth seems to point to the improving health of the US economy.

The US markets cheered the April jobs market report on Friday, May 8, 2015. The S&P 500 (SPY) (IVV) gained 1.4% to end at 2,116; the Dow Jones Industrial Average (DIA) rose 1.5% to 18,191; and the NASDAQ Composite (QQQ) rose 1.2% to 5,004 in response to the news.

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