February Jobs Report Stronger Than Expected
February's jobs report came in stronger than analysts expected, but wage growth remains stubbornly stagnant.
Heading into today’s release of February’s Jobs Report, there was some anticipation that a month of cold, snowy weather in the MidWest and along the East Coast would cause the numbers to fall away from the strong trend we had seen throughout 2014, and which we continued to see in January. While the consensus forecast put job gains at roughly 235,000 for the month, some analysts were predicting a number much lower than that. As it turned out, February’s weather didn’t slow the jobs market much at all, although wage growth remains stubbornly stagnant:
Total nonfarm payroll employment increased by 295,000 in February, and the unemployment rate edged down to 5.5 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in food services and drinking places, professional and business services, construction, health care, and in transportation and warehousing. Employment in mining was down over the month.
Both the unemployment rate (5.5 percent) and the number of unemployed persons (8.7 million) edged down in February. Over the year, the unemployment rate and the number of unemployed persons were down by 1.2 percentage points and 1.7 million, respectively. (See table A-1.)
Among the major worker groups, the unemployment rate for teenagers decreased by 1.7 percentage points to 17.1 percent in February. The jobless rates for adult men (5.2 percent), adult women (4.9 percent), whites (4.7 percent), blacks (10.4 percent), Asians (4.0 percent), and Hispanics (6.6 percent) showed little or no change. (See tables A-1, A-2, and A-3.)
Total nonfarm payroll employment rose by 295,000 in February, compared with an average monthly gain of 266,000 over the prior 12 months. Job gains occurred in food services and drinking places, professional and business services, construction, health care, and in transportation and warehousing. Employment in mining declined over the month. (See table B-1.)
In February, food services and drinking places added 59,000 jobs. The industry had added an average of 35,000 jobs per month over the prior 12 months. Employment in professional and business services increased by 51,000 in February
and has risen by 660,000 over the year. In February, employment continued to trend up in management and technical consulting services (+7,000), computer systems design and related services (+5,000), and architectural and engineering services (+5,000).
Construction added 29,000 jobs in February. Employment in specialty trade contractors rose by 27,000, mostly in the residential component. Over the past 12 months, construction has added 321,000 jobs.
In February, employment in health care rose by 24,000, with gains in ambulatory care services (+20,000) and hospitals (+9,000). Health care had added an average of 29,000 jobs per month over the prior 12 months.
Transportation and warehousing added 19,000 jobs in February, with most of the gain occurring in couriers and messengers (+12,000). Employment in transportation and warehousing grew by an average of 14,000 per month over the prior 12 months.
Employment in retail trade continued to trend up in February (+32,000) and has grown by 319,000 over the year.
Manufacturing employment continued to trend up in February (+8,000). Within the industry, petroleum and coal products lost 6,000 jobs, largely due to a strike.
Employment in mining decreased by 9,000 in February, with most of the decline in support activities for mining (-7,000).
Employment in other major industries, including wholesale trade, information, financial activities, and government, showed little change over the month.
As The New York Times notes, February actually ended up being an improvement over January:
The Labor Department reported on Friday that employers added 295,000 workers to their payrolls in February and that unemployment fell to 5.5 percent.
The report was a big improvement from January’s, when employment rose to a newly revised 239,000 jobs and the unemployment rate was 5.7 percent.
Economists were generally positive about the state of the nation’s recovery from the recession, despite its relatively sluggish pace.
“While there are a lot of risks out there, it feels less risky than in the past 25 to 30 years,” Mark Zandi, chief economist for Moody’s Analytics, said before Friday’s release. “It feels really, really good out there.”
Analysts’ expectations had called for about 230,000 new jobs and for a slight decline in the unemployment rate, which ticked up slightly to 5.7 percent in January.
One consistently dark patch in the recovery has been the sluggish growth of wages. In February, wages rose 0.1 percent, according to the Labor Department. Average hourly wages for private-sector workers have been rising slowly, at around 2 percent, for the last few years.
Slow wage growth has helped prevent the economy from returning to its potential, making many Americans feel as if the recovery has left them behind.
“Everyone knows of someone who has been laid off or has a friend or relative who has been laid off,” said Gary Chaison, professor of industrial relations at Clark University. “We hear we’re on the road to recovery, but people aren’t convinced of that.”
Still, many economists have a sunnier outlook, expecting wages to finally start to increase at a faster pace this year as the job market tightens.
“We’re facing a turning point, and we’re going to see more pressure on wages,” said Tara Sinclair, chief economist at the job search site Indeed.com.
On the good side, it’s worth noting that the both the top line unemployment rate and the broader measure of unemployment known as U-6 are at their lowest points in seven years. Considering how long it has taken the jobs market to recover from the 2007-2008 recession, this is undeniably good news especially with respect to the U-6 number, which remains above 10% but was once as a high as 15% and has taken quite some time to improve. If nothing else, this is an indication that we’ve finally reached the point where improvements in the top-line rate are coming because of greater job opportunities and not because large numbers of people have simply given up looking for a job entirely. The Labor Force Participation rate remains stubbornly low, of course, but it’s still unclear how much of that is due to people who have given up looking for work and how much is due to people who have taken early retirement. In any case, though, February generally continues a trend that started a year ago that shows no sign of ending at any point in the near future absent the intervention of some kind of external force that causes a shock to the national or global economy.
The one caveat in this month’s report, as it has been for some time now, is regarding wages:
In February, the average workweek for all employees on private nonfarm payrolls was 34.6 hours for the fifth month in a row. The manufacturing workweek was unchanged at 41.0 hours in February, and factory overtime edged down by 0.1 hour to 3.4 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was unchanged at 33.8 hours. (See tables B-2 and B-7.)
In February, average hourly earnings for all employees on private nonfarm payrolls rose by 3 cents to $24.78. Over the year, average hourly earnings have risen by 2.0 percent. In February, average hourly earnings of private-sector production and nonsupervisory employees were unchanged at $20.80. (See tables B-3 and B-8.)
To a large degree, of course, the reason that wage growth has been sluggish is due to the fact that the market for jobs remains one in which their are still more job seekers than there are jobs. As long as that remains the case, employers won’t feel pressured to push wages up. While there are some signs that this may be starting to happen, such as the recent announcement by WalMart that it was raising wages across the board for nearly all of its non-salaried workforce, we’re still at a point where this is very much an employers market and that’s likely to continue to be the case for some time to come.
With the announcement that the U-3 rate is now at 5.5%, one does have to wonder just how long such a strong jobs market can continue before cooling off. It used to be the case in the past at least that an unemployment rate between 5.0% and 5.5% was considered “full employment,” for example. While we did manage to get a year or two where the rate dipped below 5% during early 2000’s we learned pretty quickly that those numbers weren’t sustainable. Additionally, the Federal Reserve has made clear that if the jobs market to continues to improve at its present pace then they would begin to consider raising interest rates in order to forestall the possibility of inflation, which of course hasn’t been a real concern in the American economy in 34 years. Under the Fed’s current parameters, we should reach that point sometime by June or July. At that point, if interest rates do rise even slightly, it’s likely to have an impact throughout the economy.