The Animal Spirits in the Jobs Report


Has the presidential election of Donald Trump reawakened the animal spirits in the US economy, giving businesses more confidence to create jobs? Judging from the latest data, it may have — particularly if you’re a miner, a machinist or a construction worker.

The employment report for February brought positive news for Trump. Nonfarm employers added an estimated 235,000 jobs, bringing the three-month average to 209,000 — more than enough to compensate for natural growth in the labor force. The unemployment rate edged down 0.1 percentage point to 4.7 percent. And in a sign that the demand for labor is translating into bigger pay raises, the average hourly wage gained 2.8 percent from a year earlier, exceeding the average pace of the past several years.

Some industries punched well above their weight, contributing more to job gains than their share of overall employment. Mining — particularly in areas such as coal, as opposed to oil and gas — saw the biggest turnaround: In the three months through February, employment grew at an annualized rate of 9.2 percent, compared with an annualized decline of 4.5 percent during the previous five years. Construction, including heavy and civil engineering, rose at a 6.7 percent pace, up from 3.9 percent in the previous five years. Other winners included machinery and finance.

What’s so special about these sectors? One possible explanation is that they’re expecting to gain from Trump’s policies. The president has already signed orders easing restrictions on coal miners, and has pledged to revive production. His plan to invest $1 trillion in roads, bridges and other infrastructure should be good for construction (though warm February weather may also have played a role), and certain domestic manufacturers could benefit — at least in the short term — from his efforts to raise barriers to imports. In finance, he has promised to roll back regulation and has ordered a review of a retirement-advice rule that much of the industry had opposed.

Others are tougher to explain. The strong growth in hiring at clothing and accessories stores, for example, contrasted with weak overall job growth in retail trade. Service providers, which account for more than two-thirds of all employment, hired at a slower pace than they did in earlier years, suggesting that the optimism remains far from pervasive.

To be sure, these are early days: Trump has president only a few months, not enough time to implement an economic agenda. So far, some employers appear to be giving him the benefit of the doubt. For that confidence to spread, he’ll have to follow through successfully on policies — such as well-crafted infrastructure investment and sensible measures to make banks simpler and stronger — that could benefit the economy overall, rather than boosting specific sectors at the expense of the environment or financial stability.


How the Fed Does More with Less


For all the fretting about how U.S. productivity isn’t growing as quickly as it should, there’s at least one place where it appears to be doing pretty well: the Federal Reserve.

The Fed plays a much bigger role in the economy and financial system than it did a decade ago, yet it manages to do so with fewer employees. Indeed, employment at the central bank has been declining since the 1990s — both in nominal terms and in relation to the financial institutions it serves and oversees.

As of July 2016, the Fed had about 0.7 staff for each 100 people employed in the credit intermediation sector (which includes banks and other consumer lenders), according to the Bureau of Labor Statistics. This ratio is lower than it was in 2007, before a severe financial crisis led to a dramatic expansion of the Fed’s responsibilities.

So is the Fed really doing that much more with less? Yes and no. A lot of the change in employment has to do with a thing that many millennials wouldn’t even recognize: the paper check. As recently as the early 2000s, a large share of Fed staff — literally thousands of people — were engaged in collecting and processing all the checks that people and companies used to pay for everything from groceries to labor.

Thanks to the internet and electronic payments, the Fed can now process more payments with fewer people. As of 2012 (the latest data available), the regional Federal Reserve banks had just 840 employees providing fee-based services to financial institutions (including checks and other payment and settlement services), down from more than 5,400 in 2001. With fewer physical checks to handle, those people can move a lot more money: The daily value processed per employee stood at about $4.4 billion in 2012, up from less than a half-billion in 2001.

Meanwhile, employment in other departments has risen in response to the 2008 financial crisis and the Dodd-Frank Act of 2010, which gives the Fed such responsibilities as stress-testing banks and overseeing all systemically important financial institutions. The numbers, though, aren’t large enough to offset the decline in payment processing. As of 2012, the Federal Reserve Board and regional banks employed 4,108 people in their supervision and regulation departments, up from 2,915 in 2006.

Surely, there’s more the Fed can do to boost the benefit it provides per employee. Sensible capital regulation, for example, could make the system more resilient while reducing the need for supervisors to micromanage banks. Still, it’s instructive to recognize that when it comes to staffing, the demise of paper checks matters more than Dodd-Frank. At the very least, it helps put things in perspective.