Friday, March 4, 2016

February jobs report: solid headlines, decidedly mixed internals

- by New Deal democrat


  • +242,000 jobs added to the economy
  • U3 unemployment rate unchanged at 4.9%
With the expansion firmly established, the focus has shifted to wages and the chronic heightened unemployment.  Here's the headlines on those:

Wages and participation rates
  • Not in Labor Force, but Want a Job Now: down  -103,000 from 5.973 million to 5.870 million
  • Part time for economic reasons: unchanged at 5.988
  • Employment/population ratio ages 25-54: up +0.1% from 77.7% to 77.8% 
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: unchanged at $21.32,  up +2.4%YoY. (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.)
December and January were revised upward by +9,000 and +22,000, for a net change of +31,000. 

The more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were neutral to negative.

  • the average manufacturing workweek was unchanged at 41.8 hours (but last month was revised up +0.1.  This is one of the 10 components of the LEI, the net will be a posittive.
  • construction jobs +19,000.  YoY construction jobs are up +253,000.  
  • manufacturing jobs decreased by -16,000, and are up +25,000 YoY.
  • Professional and business employment (generally higher-paying jobs) increased by +23,000 and are up 604,000 YoY.

  • temporary jobs - a leading indicator for jobs overall decreased by -9,800.

  • the number of people unemployed for 5 weeks or less - a better leading indicator than initial jobless claims - increased by +48,000 from 2,249,000 to 2.297,000.  The post-recession low was set 6 months ago at 2,095,000.

Other important coincident indicators help us paint a more complete picture of the present:

  • Overtime was unchanged at 3.3 hours.

  • the index of aggregate hours worked in the economy fell by -0.4 from  105.3 to 104.9. 
  • The broad U-6 unemployment rate that includes discouraged workers declined from 9.9% to 9.7%.
  •  the index of aggregate payrolls fell by -0.7  from 127.8 to 127.1.
Other news included:      
  • the alternate jobs number contained in the more volatile household survey increased by +520,000 jobs. This represents an increase  of 2,843,000  jobs YoY vs. 2,673,000 in the establishment survey.  [Note: I updated this to correct an error, as I originally had +555,000 jobs for this]
  • Government jobs rose  by +12,000.  
  • the overall employment  to  population ratio for all a ges 16 and above -rose by 0.2  from  59.6   to 59.8  m/m and +0.5% YoY.  The  labor force participation rate rose 0.-1% from 62.7%  to  62.9%  and is now up +.0.1% YoY (remember, this incl udes droves of retiring Boomers).  

The headline numbers - strong job gains, and a decline in the broad U6 underemployment rate - are certainly welcome. 

Other significant positives included positive revisions to the last two months, an increase in both the employment to population ratio and labor force participation rate, and a decline in those out of the labor force who want a job now (but still about 1.4 million above its 1999 and 2007 lows).

But there were some significant and/or worrisome negatives as well.  Last month's big increases in wages and hours were partially reversed.  More worrisome was the establishment of a trend in declining temporary jobs (a leading indicator for overall employment), and negatives in two other leading sectors:  a rise in short term unemployment, and a loss of manufacturing jobs

In short, while the strong positives in coincident measures of employment are certainly welcome, the decline in some important leading indicators for employment raises a significant yellow flag.