Rosy jobs report shows that workers are in the catbird seat

The job market continues to hum. That’s the message in the April jobs report from the Bureau of Labor Statistics. The economy added a surprisingly strong 263,000 jobs in the month.

So far this year, job growth has averaged close to 200,000 per month, consistent with the sturdy gains enjoyed for the past eight years. For the sake of many who still wait to fully take part in the gains, let’s hope the good times keep rolling.

{mosads}Most industries added to payrolls during April, although brick-and-mortar retailers continue to struggle with the online onslaught and are laying off workers. Construction, temporary help and restaurants added more jobs than what is typical for April.

At this pace of job creation, unemployment and underemployment continue to decline. The unemployment rate declined to 3.6 percent last month, a new low for this business cycle and about as low as it has been in half a century.

The underemployment rate held steady, but at a cyclical low. This figure includes part-timers who want a full-time job and those without jobs who are not counted as unemployed but who say they want to work.

It’s a workers’ market. Workers are increasingly in the catbird seat in negotiations with employers. They are asking for bigger raises, and they are getting them. Wage growth has accelerated, and recent wage gains have been strongest for lower-paid workers, due in part to minimum-wage increases in many places.

The current economic expansion is certain to celebrate its 10th birthday this June and become the longest expansion in history by the Fourth of July. For history buffs, the previous record holder, the 1990s expansion, was fueled by business adoption of the internet — Amazon opened for business as an online bookseller in July 1994.

There was much to like in today’s job numbers — along with one glaring blemish. There had been signs that in the strong job market a lot of people stuck on the sidelines since the financial crisis would get back to work. A much smaller share of prime-age men is at work today than in times past.

But today’s numbers took a step back in this regard. The labor force participation rate fell, and it hasn’t changed much for almost five years. With the large baby-boom generation now retiring en masse, the labor force is growing more slowly.

Indeed, the number of people coming into the labor force to look for work is growing by only about 100,000 per month, half the current pace of job growth.

Businesses are going to find it increasingly difficult to fill the already record number of open job positions. Businesses already say their inability to hold onto workers and find new ones is their No. 1 problem. With job growth running at 200,000 per month and labor force growth at 100,000, this problem is set to get much worse.

Businesses are responding by doing everything they can to lift the productivity of existing workers. They have had some recent success, but if history is any guide, they will fall short.

One way or another, the economy’s growth will ultimately slow and the job market will weaken. Experience shows that is when the threat of recession mounts.

It is rare that the job market is as strong as it is today. We’ve been here only three times in the past 30 years and then only briefly. Indeed this is why, despite the strong job growth and low unemployment, many Americans still suffer from severe financial stress.

These individuals have little or no savings, own very little and owe too much. For them, this long expansion has not been long enough. It would thus be especially disconcerting if it doesn’t celebrate an 11th birthday.

Mark Zandi is the chief economist of Moody’s Analytics.