U.S. Construction Labor Trends

Nonfarm payroll employment rose 353,000 in January while the unemployment rate was unchanged at 3.7%, where it had been for three months, just below the 3.8% rate over the prior three months.

These are above the cycle low (3.4%) but moving in a direction that is inconsistent with 2% inflation on a sustained basis. Adding to the tone of tightness, the labor-force participation rate was unchanged at 62.5%, the lowest level since last February. This is consistent with the view that demographic forces (the aging of the working-age population) are exerting downward pressure on the participation rate. We should expect the trend in the participation rate to be flat to down going forward. Average hourly earnings (AHE) rose 0.6% in January, the largest one-month increase in nearly two years. Given the usual statistical noise, minimum wage increases, regular bonus pay, seasonal adjustment, etc., it is difficult to discern a clear signal. However, private job openings did rise over the prior two months, and the 12-month increase in AHE rose 0.2% point to 4.5%, above a range that we view to be consistent with 2% sustained inflation.

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