February Regional Employment Growth: 3 Things to Know

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The month of February saw regional employment growth across all four major areas of the United States, according to ADP's February Regional Employment Report.

"February saw 21,000 more jobs added nationally than January's number, with the vast majority of that increased growth coming from the West and Northeast," said Ahu Yildirmaz, VP and head of the ADP Research Institute. "Weakness in Manufacturing and Energy continues to be a drag on the South and Midwest."

All regions posted at least a 0.10 percent positive growth rate, and there was no net loss of positions any of the 29 U.S. states ADP samples for their data.

Despite the continued strain in the manufacturing and energy sectors, the latest regional employment growth report shows continued indicators that the United States is quickly approaching full employment. Economists and researchers remain positive about the overall economic outlook. For HR leaders, considering the potential impact of regional employment growth can help shape a forward-looking strategy.

1. Discretionary Income Is on the Rise

The 20,200 new positions added in Florida between January and February can possibly be seen as a nationwide economic indicator of growth and increased discretionary income among consumers. According to Yildirmaz, "the state [of Florida] is something of a gauge of the broader U.S. economy." High numbers of domestic tourists have a positive impact on job growth and speak to rising consumer confidence.

Recent gains in U.S. consumer spending are a positive indicator for economic growth across all regions and sectors, as well. According to The New York Times, "consumer spending accounts for more than two-thirds of American economic activity." Consumer demand for goods and services is likely to further fuel growth in all sectors, although new hires could come at a total compensation premium.

2. Speculation About Fed Interest Rates Remains High

Speculation about the Federal Reserve's intent to respond to improved employment growth with a hike in interest rates remain high. According to CNBC, some 80 percent of economists believe that interest rates will rise at least once in 2016, and 17 percent are expecting at least three increases.

Higher interest rates will be an advantage to businesses in certain areas of the country. U.S. News writes that organizations in regions and sectors largely fueled by consumer discretionary income, finance and technology could stand to benefit from increased consumer interest rates and higher corporate spending. Conversely, organizations that could suffer a potential negative impact from dips in the stock market should prepare for the strong possibility of higher interest rates ahead.

3. Region Affects Employee Habits

Regional employment health is not necessarily correlated with wage growth trends, but HR leadership should consider regional trends as a component of retention and recruitment strategies. The ADP Research Institute Workforce Vitality Report (WVR) indicates that job switchers — individuals who switch roles or sectors to achieve higher total compensation — in the Midwest and Northeast experienced the highest average wage growth in Q4, at 5.3 percent and 5.8 percent, respectively.

Region, workplace demographics and sector can all have a strong impact on an organization's retention risks and solidify the need to keep benefits and total compensation packages competitive. For example, according to the WVR, although the region saw the slowest employment growth in Q4, the Northeast had the best wage growth for job switchers, possibly due to a "preponderance of highly paid financial and tech jobs." Organizations should evaluate risks on a regional and sector-wide basis to retain necessary talent and counteract the national impact of wage growth and a tightening talent market.

Although the increased growth in employment rates across all U.S. regions is a positive trend for the economy, HR leadership should consider their organizational and regional standing as the U.S. job market barrels toward full employment. Risks can vary significantly, but planning for job switchers, potential interest rate increases and increased consumer spending should be a sound strategy for the months ahead.