U.S. Jobs Report: Continued Employer Demand Fuels Rise in Job Opportunities Outside the Big Cities

Indeed chief economist weighs in on this month's jobs numbers ahead of the US jobs report on Friday.

So far, 2016 has been a strong year for the US labor market, with 628,000 jobs added in the first quarter. This follows the steady trend of gains seen in recent years, and we expect Friday’s jobs report from the federal government will show this growth continuing into the second quarter of 2016, as employer demand for workers remains robust.

Indeed data, meanwhile, shows that demand is strong not only across most industries (with the exception of energy-related jobs) but also regionally. Here, perhaps, is where things really get interesting: The share of job postings outside the largest 50 cities in the US has grown by 2 percentage points in the past twelve months. These postings now make up over 77% of total Indeed job postings versus 75% one year ago.

Why is this significant?

Typically, major metro areas drive economic and labor market growth, rather than smaller cities. In fact, while the 300 biggest metropolitan areas worldwide house 20 percent of the world’s population, they produce almost 50% of the world’s GDP. The increase in postings outside major US population centers suggests that the labor market has now strengthened to the point that job creation is happening outside of these traditional hubs. In other words, “hot” job markets aren’t always only in the big cities.

That said, we shouldn’t get too carried away here: The rust belt still contains difficult job markets while former energy boom towns continue to struggle. Furthermore, solid job reports don’t necessarily translate into satisfied workers or substantial wage gains. Many people still feel frustrated and anxious about their financial prospects. However, for those who are currently job hunting or hoping to reenter the labor force after a long break, this regional growth is good news—it shows an increase in opportunities outside of the traditional centers for work.

One caveat, however: Although the overall picture is good (and this month weekly jobless claims also fell to their lowest levels since 1973) we should note a potential cloud on the horizon. Yes, job growth is up, but the overall economy is not keeping pace. In fact, quarterly growth was at a two-year low between January and March.

What are we to make of this? Well, it indicates that consumers and businesses lack confidence and are exercising caution when it comes to spending. And if this trend continues, then the long term effects could be serious—and the day may come sooner than we’d like when we report that jobs growth has slowed.

Consensus Numbers

 PriorConsensusIndeed Outlook
Nonfarm Payrolls (M/M Change)215,000200,000Bullish: There’s still lots of employer demand out there. The challenge will be attracting people into the roles.
Unemployment Rate 5.0%4.9%Although a drop back below 5% might sound good, a continuation of last month’s increases in labor force participation could keep this number at 5% which would be welcome news if it came for the right reasons.
Average Hourly Earnings
0.3%0.3%We’ve heard lots of news from employers that they’re feeling pressure to raise wages, will this be the month we see that pressure show up in aggregate numbers?