Employment situation

The employment report was one of the best seen this cycle. Total payroll employment rose 192,000 and private payroll employment rose 222,000– one of the strongest this cycle. Moreover the household survey reported employment gains of 250,000.

Part of the strength obviously was just a make up for the very weak gains in January because of the weather. The two months combined do not really represent much of a break in trend. This is apparent in the unemployment rate which only fell from 9.0% to 8.9%.

The hours worked show the same slow trend.
Moreover, average hourly earnings growth remains subdued. Wage growth may be trying to bottom, but any earlier evidence that it is starting to accelerate has disappeared.

Moreover, average weekly earnings growth remains weak. With income growth this weak fears of significantly higher inflation appear to be misplaced. Although headline inflation may be ticking up because of food and energy, the weak income growth implies that the impact of higher food and oil prices will be felt much more in weak consumer spending rather than higher inflation expectations.

The basic trend that employment is doing better than in the last two jobless recovery but poorly compared to what happened in earlier cycles before the great moderation does not seem to have changed regardless of how bullish this employment report may seem.

I recognize that labor force growth has slowed and that over the long run the old labor force growth of some 2% can not be sustained. But it is still informative to compared the recent results compared to the old trends.