February jobs report: a blowout

February jobs report: a blowout

  • +273,000 jobs added
  • U3 unemployment rate declined -0.1% to 3.5%
  • U6 underemployment rate rose 0.1% to 7.0%

Leading employment indicators of a slowdown or recession


I am highlighting these because many leading indicators overall have strongly suggested that an employment slowdown is here. The following more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were mixed to slightly negative:

  • the average manufacturing workweek rose 0.2 hours to 40.6 hours. This is one of the 10 components of the LEI and will be a strong positive.
  • Manufacturing jobs rose by 15,000. Manufacturing has gained only 31,000 jobs in the past 12 months.
  • construction jobs rose by 42,000. In the past 12 months construction jobs are up 223,000, a strong acceleration even from 2018 levels. Residential construction jobs, which are even more leading, rose by 9400.
  • temporary jobs fell by -3300.
  • the number of people unemployed for 5 weeks or less declined by -46000 from 2,059,000 to 2,013,000. This is a new expansion low.
Wages and participation rates

Here are the headlines on wages and the broader measures of underemployment:
  • Not in Labor Force, but Want a Job Now: rose by 58,000 to 4.962 million.
  • Part time for economic reasons: rose  by 136,000 to 4.318 million
  • Employment/population ratio ages 25-54: fell -0.1% to 80.5%
  • Average Hourly Earnings for Production and Nonsupervisory Personnel: rose $.08 to $23.96, and is up +3.3% YoY. This is a deceleration from last fall. (Note: you may be reading different information about wages elsewhere. They are citing average wages for all private workers. I use wages for nonsupervisory personnel, to come closer to the situation for ordinary workers.)
Holding Trump accountable on manufacturing and mining jobs

 Trump specifically campaigned on bringing back manufacturing and mining jobs.  Is he keeping this promise?  
  • Manufacturing jobs rose an average of +2750/month in the past 12 months vs. the last seven years of Obama’s presidency in which an average of +10,300 manufacturing jobs were added each month. This is a sharp deceleration.
  • Coal mining jobs fell by -500, and an average of -125 jobs/month in the past year vs. the last seven years of Obama’s presidency in which an average of -300 jobs were lost each month

December was revised upward by 37,000. January was revised upward by 48,000, for a net change of 85,000.

Other important coincident indicators help  us paint a more complete picture of the present:
  • Overtime rose 0.1 hour to 3.2 hours
  • Professional and business employment (generally higher-paying jobs) rose by 32,000 and is up 285,000 YoY, a deceleration from 561,000 in 2018.
  • the index of aggregate hours worked for non-managerial workers rose by 0.5%
  •  the index of aggregate payrolls for non-managerial workers rose by 0.8%
Other news included:
  • the alternate jobs number contained  in the more volatile household survey rose by 45,000  jobs.  This represents an increase of 1,893,000 jobs YoY vs. 2,409,000 in the establishment survey.
  • Government jobs rose by 45,000 (38,000 if census jobs are omitted).
  • the overall employment to population ratio for all ages 16 and up declined -0.1% to  61.1% and is up 0.4% YoY.
  • The labor force participation rate was unchanged at 63.4% and is up 0.3% YoY.
Needless to say, this was a very strong report. Only a few items were negative, including a slight increase in the underemployment rate, involuntary part time employment, and those not in the labor force who want a job now. There was also a slight decline in the employment to population ratio, and a decline in the leading sector of temporary jobs. Wage gains decelerated slightly from peak.
But there were blowout gains in government jobs and construction in particular. Revisions to the past several months, a leading indicator, were extremely positive. Aggregate hours and payrolls increased strongly.

My important cautionary note is that we had a mild winter in the entire lower 48 states, so the seasonal adjustments to sectors like construction may be playing an outsized role. If so, there will be payback in the next few months. Also, the comprehensive numbers from actual tax reporting for the Third Quarter of last year just got reported two days ago, and it showed the slowest YoY gain bar one quarter since early 2011 at 1.1%, vs. 1.3% for nonfarm payrolls. In short, there are important reasons to suspect that the gains shown in recent monthly job reports  have been overstated.