The economic landscape may look a bit fallow in this fall season of China worries and political gridlock, but several recent reports suggest that the seeds of significant spring of job growth lie just beneath the surface.
The Associated Industries of Massachusetts Business Confidence Index released last week found that 32 percent of Massachusetts employers surveyed during October plan to add workers during the next six months while only 7 percent anticipate cutbacks. That’s a far brighter picture than that of the previous six months when 27 percent of companies hired people and 18 percent reduced their staff levels.
The news was even better on Friday as the government reported that the U.S. economy added 271,000 jobs last month on strong hiring that brought the unemployment rate down to a seven-year low of 5 percent. Average hourly earnings also bounced back, rising 0.4 percent in October and 2.5 percent over the last 12 months, the healthiest pace since 2009.
The unemployment rate for Massachusetts, which has consistently outperformed the national economy throughout the recovery, was 4.6 percent for September. October state data is scheduled for release on November 19.
Employers remain circumspect in the face of an economy that slowed to a 1.5 percent growth rate during the third quarter (the state growth rate also slipped to 2.0 percent), but they appear to regard the slowdown as a cyclical pause rather than a structural shift. It’s the same view that experts believe will now persuade the Federal Reserve to increase interest rates before the end of the year.
“The employment responses reveal optimism,” said Fred Breimyer, regional economist at the FDIC and a member of the AIM Board of Economic Advisors that oversees publication of the Business Confidence Index.
Analysts say almost every element in the Friday jobs report was positive. For example, the broader U-6 measure that takes account of underemployment and discouraged workers fell below 10 percent at 9.8 percent.
“It was pretty much everything you could ask for in a jobs report,” Michelle Meyer, deputy head of United States economics at Bank of America Merrill Lynch, told The New York Times. “Not only was the headline number strong, but there were upward revisions for prior months, the unemployment rate fell and wage growth accelerated.”
The degree to which that wage growth continues depends upon whether hiring by employers is broad enough to finally eliminate the slack that built up in the labor market after the recession of 2009. Annual surveys by AIM and other organizations have found that wage growth has remained consistently at 3 percent throughout the steady if unspectacular job growth of the recovery.
Wages could become a particular issue in fast-growing states like Massachusetts where technology driven industries continue to face a shortage of qualified workers.
“Massachusetts continues to out-perform the nation as a whole economically, which is reflected in persistently higher readings for the Massachusetts Index compared to the U.S. Index,” said Alan Clayton-Matthews, professor at the School of Public Policy and Urban Affairs at Northeastern University, and another member of the AIM Board of Economic Advisors.
“Our local economy is of course affected by national and global conditions, but its underlying strengths are keeping us competitive through ups and downs.”