February Jobs Report
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The US added 235,000 new jobs in February, and the unemployment rate dropped to 4.7% from 4.8%. The consensus estimate was for about 210,000 new jobs.
The Bureau of Labor Stats said 238,000 new jobs were created in January instead of 227,000. December’s gain was trimmed to 155,000 from 157,000. In February, the year-over-year change was 2.35 million jobs. It was the 83rd straight month of job creation.
Over the past three months, including revisions announced today, monthly job growth has averaged 209,000, while year-over-year wage growth jumped up to 2.8 percent.
In February, average hourly earnings for private payrolls increased by 6 cents to $26.09, following a 5-cent increase in January. Over the year, average hourly earnings have risen by 71 cents, or 2.8 percent.
Hours worked was unchanged at 34.4 a week. The Labor Force Participation Rate increased slightly to 63.0% in February, indicating more people were in the labor pool. The U-6 unemployment rate, which measures unemployed workers, plus underutilized or part-time for economic reasons, dropped to 9.2% from 9.4%.
In February, construction employment increased by 58,000 (this was likely the result of a very warm month); employment in private educational services rose by 29,000; manufacturing added 28,000 jobs; health care employment rose by 27,000; employment in professional and business services continued to trend up in February, gaining 37,000 – the industry has added 597,000 jobs over the year; employment in mining increased by 8,000 in February; Government added 8,000 jobs, meaning private payrolls increased by 227,000 for the month.
Retail trade employment lost 26,000 jobs in February, following a gain of 40,000 in the prior month. First, retailers hired too many people for the holidays. Sales never came back in January and workers got pink slips in February. Sales have started off slow in the first quarter thanks to tax-refund delays.
As we reported yesterday, jobless claims are near a 44-year low. Recruiters and employers complain that qualified workers are scarce, pushing them to raise wages and strengthen benefits. Even lower-skill workers in some sectors are finding themselves in more demand.
Staffing agency Manpower North America’s annual survey of 2,200 hiring managers showed that 46 percent reported they had difficulty filling job vacancies in 2016, up from 32 percent in 2015.
Where you live and what you do for work can determine how bright your job prospects are. Those who reside in or near larger cities are receiving the highest gains, despite high housing costs. Large metropolitan counties have seen more than twice the annual wage growth of non-metropolitan areas, per the latest figures from the Bureau of Labor Statistics.
This jobs report marked the first full report for the Trump administration; the January report was based on data collected before the inauguration. White House press secretary Sean Spicer tweeted: “Great news for American workers: economy added 235,000 new jobs, unemployment rate drops to 4.7% in first report for @POTUS Trump.”
And while it was a good report, it is 3,000 fewer jobs than January. Technically, Spicer violated an obscure federal rule against federal officials touting public data too soon after the official release of the data; maybe Spicer can nominate that rule for deregulation.
The Drudge Report published a headline: “Great Again + 235,000”. And then Trump retweeted the headline. But in the past Trump has called the same monthly report “phony” and a “hoax.” During a press conference in 2015, Trump said the unemployment rate, then at 5.1%, was phony and the real rate of unemployment was closer to 42%. In today’s press conference Spicer said Trump had told him, “They may have been phony in the past, but it’s very real now.”
And while the jobs report is an imperfect measure, it is the most accurate gauge of the labor market that we have. And while it is correct to credit or blame any given administration with specific numbers from the day of inauguration on, Trump did virtually nothing to affect the numbers.
By mid-February, Trump had done nothing that would have a direct impact on the economy. No changes to the tax code or federal spending had been enacted at that point. What about those jobs he saved at the Carrier air conditioning manufacturing plant? Well, that was great, but it was only about 1,000 jobs out of an economy with 146 million jobs – not enough to move the needle.
On the other hand, it is entirely plausible that increased consumer confidence and what some are calling animal spirits, is enough to persuade some business owners to start hiring; maybe animal spirits pushed home builders to hire 58,000 construction workers or maybe very warm weather across the country was enough; but attitudes still must be confirmed by current conditions.
And contrary to Trump’s claims that he inherited a mess, the economy, while far from perfect, is better. The 235,000 extra jobs that have Drudge and Trump so enthused are fewer than the results in four of the 12 months of 2016. The unemployment rate has hovered between 4.6 percent and 5 percent for 18 consecutive months, since September 2015.
Yes, President Trump deserves the credit for the economy’s performance from the day of his inauguration until the day he leaves office – as with all presidents. Trying to come up with a different way of measuring a president’s performance is likely to get too muddled. Yes, the economy is still benefiting from Obama’s presidency, but, these aren’t his numbers anymore.
The question is whether the numbers can be sustained. Can we see 300,000-plus new jobs per month? Can we see the unemployment rate drop to 4.5% or 4% or 3.5%? Where will we find qualified workers to fill those jobs of the future? Will employers finally have to pay for those qualified workers? Are the current numbers sustainable or is the economy at or near full employment?
Probably not, the recovery has been uneven and we should be able to add many more jobs. But can we add 2.35 million jobs or more in the next 12 months? And don’t forget, the Fed is tapping on the brakes.
The Federal Reserve has been wary of signs of wage-push inflation. Fed policy makers want to maintain control of inflation and so have begun to slowly raise rates, which makes borrowing and risk-taking more expensive. At the same time, the Fed wants to avoid putting the brakes on job hiring.
Today’s solid jobs report is the last major economic data before the Fed determines monetary policy at their FOMC meeting next Tuesday and Wednesday, and it appears to clear the way for an interest rate hike next week.
While hiring was robust and wage gains strong, the pace might not be fast enough to force the central bank to accelerate its timeline for future rate hikes from the current forecast of three. Dot plot expectations on rates for 2018 by Fed members could also tick higher.
For several years, back to Bernanke and including Yellen, the Fed has argued for fiscal stimulus. The Fed managed to goose Wall Street with Zero Interest Rate Policy and QE 1,2,3,4 – which avoided a meltdown, but it was never enough to get the economy firing on all cylinders. The economy is not a mess but it ain’t great.
Fiscal flow or government spending is flat year over year, and that’s causing economic growth to decelerate to zero. The forecast for first-quarter GDP growth is now down to 1.3%, and we’ll get that only if we’re lucky. It’ll probably be closer to zero.
And while Wall Street has been enjoying a dose of animal spirits, fiscal policy takes longer to sink in; tax cuts, deregulation, and infrastructure spending goes through committees and votes. We’ll be lucky to feel the impact in 18 months, if all goes smoothly; and there is no guarantee that things will go smoothly.
Meanwhile, the Fed is tapping the brakes. The transition from monetary policy as an economic driver to fiscal policy is difficult and can easily result in recession.
Rates will rise, prices will go up. If you have debt, you will pay more. If you want to buy something on credit, you will pay more, or you won’t buy it. Housing will become less affordable. Credit card purchases will be more expensive, you might want to keep that card in your wallet. A new car? Maybe not.
And that infrastructure spending the government is planning – it needs to be financed – and that financing will come at a higher rate, adding to the deficit. Treasury Secretary Steven Mnuchin sent letters to congressional leaders on Thursday asking them to raise the debt ceiling by midnight on March 15 to prevent the Treasury from needing to take “extraordinary measures” for the federal government to keep paying its bills.
This Sunday, at 2 AM, most of the nation will move its clocks forward one hour. Daylight Saving Time reminds us of the sun’s daily effect on our lives and tells us spring is on its way. A Department of Energy study found Daylight Saving, saves the nation about 1.3 billion kilowatt-hours, equal to the yearly energy used by more than 100,000 households.
However, not everyone agrees it offers energy saving benefits. Some studies claim the time switch saves energy on lighting but is surpassed by usage increases for heating and air-conditioning. In Arizona, we do not observe daylight-saving, we have plenty of sunshine in the summer and don’t need more.
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