Friday, March 8, 2013

Employment +236,000; Unemployment at 7.7%; Finally a Better Than Average Report

From the BLS:

Total nonfarm payroll employment increased by 236,000 in February, and the unemployment rate edged down to 7.7 percent, the U.S. Bureau of Labor Statistics reported today. Employment increased in professional and business services, construction, and health care.

On the surface, these are good numbers.  The total number of jobs has increased over 200,000 and the unemployment rate ticked down .2%.

The employment-population ratio held at 58.6 percent in February. The civilian labor force participation rate, at 63.5 percent, changed little.

These numbers tell us that on a macro scale comparing the total number of employed to the total population, nothing really changed last month.

In looking at the establishment data, let's start with this nugget:

In February, employment in construction increased by 48,000. Since September, construction employment has risen by 151,000. In February, job growth occurred in specialty trade contractors, with this gain about equally split between residential (+17,000) and nonresidential specialty trade contractors (+15,000). Nonresidential building construction also added jobs (+6,000).

Yes -- it's only one month of data.  But it indicates that the housing rebound is starting to have a positive impact on construction employment -- long a laggard in the statistics.  This is a very good development.

Professional and business services added 73,000 jobs in February;
The health care industry continued to add jobs in February (+32,000).
Employment in the information industry increased over the month (+20,000),
Employment continued to trend up in retail trade in February (+24,000).

So -- we see good gains across the spectrum

However -- the really good news is here:

In February, the average workweek for all employees on private nonfarm payrolls edged up by 0.1 hour to 34.5 hours. The manufacturing workweek rose by 0.2 hour to 40.9 hours, and factory overtime edged up by 0.1 hour to 3.4 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls increased by 0.2 hour to 33.8 hours. (See tables B-2 and B-7.)

Average hourly earnings for all employees on private nonfarm payrolls rose by 4 cents to $23.82.  Over the year, average hourly earnings have risen by 2.1 percent. In February, average hourly earnings of private-sector production and nonsupervisory employees increased by 5 cents to $20.04. (See tables B-3 and B-8.)

The workweek and earnings increased.  And the increase in actual earnings was pretty large by one month standards.

On a scale of 1-10, this report is a 7.5.

NDD here with a few additional comments:

As usual for me, let's emphasize the forward-looking indicators:
  • the manufacturing workweek increased .2 hours to 40.9.  This is a component of the LEI.
  • temporary jobs increased 16,000.  These turn before the overall report.
  • manufacturing jobs increased 14,000.  These also usually lead.
  • the number of those unemployed between 0 and 5 weeks decreased by -99,000. This metric tends to turn before weekly initial jobless claims.
  • the household survey showed 170,000 jobs added.  This survey, while more volatile, tends to turn before the establishment survey which gives us the "headline" number.
Among coincident data,
  • aggregate hours increased by .5, with the index increasing to 97.8, its highest reading since before the 2008-09 recession.
  • the U6 unemployment rate declined 0.1% to 14.3%, a new post-recession low.
  • construction jobs added 58,000. The new health in this sector continues to appear.
  • average hourly earnings increased $.04 to $23.82.  Average hourly earnings are up 2.1% YoY, which, since inflation is only up 1.6% YoY means that Joe/Jane Sixpack's paycheck has started to grow in real terms.
This is an unambiguously good report.  The only caveats are that there may be some remaining seasonality in the numbers, because February has been a good month repeatedly for the last several years.  The second caveat, of course, is that the report is not good enough.  The employment to population ratio is stubbornly low at 58.6%, meaning it will take more or less forever at this rate to make up for all of the jobs lost during the Great Recession on a population-adjusted basis.

Finally, the forward looking internals in this report are not consistent with a recession.  Also, despite the flailings of the forecasting service that continues to insist that a recession started in September 2011, oops no in the first quarter of 2012, oops again by midyear 2012, oops no this time we really mean it in July 2012, sometines employment continues to rise in the early stages of a recession.  Well, in only one recession in the last 90+ years has employment risen more than 3 months into a recession (8 months in 1974).  We are now allegedly 7 months into this recession, and we have added far more jobs than in 1974.