The US jobs recovery is gaining quality, not just quantity. Payrolls and earnings increased in January, but even more encouraging was a rise in participation: the percentage of Americans finding or seeking work. That softens a slight uptick in the unemployment and underemployment rates - and should keep the Federal Reserve's expected mid-year rate hike on track.
Last month's average hourly earnings were up 12 cents from December, probably in part because nearly half of US states boosted the minimum wage. The addition of 257,000 jobs is impressive, and the average of 336,000 more positions over the past three months is even better. In fact, 3.2 million Americans joined the workforce over the past 12 months. That's the most since the 2000 dotcom boom, which included many short-lived technology jobs.
Payroll growth looks a lot broader this time. The health care, retail, construction and professional services industries each added between 39,000 and 50,000 jobs. That easily outweighed the loss of 3,000 slots in mining, which suffered from the drop in oil prices. The only other negative news was a minuscule bump in the percentage of people who could find only part-time jobs.
The rise in unemployment, from 5.6 per cent to 5.7 per cent, isn't derived from weakness but from the 700,000 more Americans who joined the workforce and boosted the participation rate. That rate has understandably worried some economists, because at 62.9 per cent it is still well below the 66.4 per cent at the beginning of the recession eight years ago. If last month's increase marks the start of a trend, though, then a big source of scepticism about the jobs recovery should begin to disappear.
Even then, participation in the labour force won't soon return to pre-recession levels. That's because many older Americans are on the verge of retirement, and younger ones are staying in school longer. With employers starting to hire aggressively, it probably won't be long before the participation figure reaches some new equilibrium.
In any event, the good news makes the Fed's expected interest rate increase more likely. Things could still change, of course, given global economic turmoil. But a healthy labour market is among the surest ways to avoid any unpleasant surprises.
