Friday, March 7, 2014

February jobs report: surprisingly decent

- by New Deal democrat

In February 175,000 jobs were added to the US economy.  The unemployment rate rose slightly, up 0.1% to 6.7% . December and January were both revised upward by a total of +25,000.  Given the relatively poor data in a number of sectors that we have seen in the last couple of months, this was a surprisingly decent report - although there are a few cracks in the facade. 

As usual, first, let's look at the more leading numbers in the report which tell us about where the economy is likely to be a few months from now. These were either positive or neutral.
  • the average manufacturing workweek was unchanged at  40.7  hours (but is down 0.3 hours from several months ago). This is one of the 10 components of the LEI.

  • construction jobs increased by 15,000. YoY 152,000 construction jobs have been added.

  • manufacturing jobs rose by 6,000.

  • temporary jobs - a leading indicator for jobs overall - increased by 24,400.

  • the number of people unemployed for 5 weeks or less - a better leading indicator than initial jobless claims - fell to 2,373,000, the second lowest post-recession reading compared with December's 2,255,000 low.

Now here are some of the other important coincident indicators filling out our view of where we are now:
  • The average workweek for all nonsupervisory workers declined by -0.2 hours from 33.5 hours to 33.3 hours.

  • Overtime hours decreased from 3.4 hours to 3.3 hours.

  • the index of aggregate hours worked in the economy fell by -0.4 from  106.8 to 106.4. This is -0.8 off its post-recession high set four months ago.

  • The broad U-6 unemployment rate, that includes discouraged workers declined from 12.7% to  12.6%, a post-recession low.

  • The workforce rose  by 264,000. Part time jobs fell by -210,000.
Other news included:
  • the alternate jobs number contained in the more volatile household survey increased by 42,000 jobs.  The household survey jobs numbers had been lagging the establishment survey numbers, but as expected this difference has now been almost entirely made up, with the household survey showing a 1.8 million increase in jobs YoY.

  • Government jobs actually rose by 13,000.

  • December's poor jobs reading got slightly less poor, revised up from 75,000 to 84,000.  January was revised up from 113,000 to 129,000.  Upward revisions happen in expansions, so this is good.

  • average hourly earnings increased  $.09 to $24.31. The YoY change is +2.2%, meaning that YoY average real wages probably also rose in February, given the expected slight rise in consumer prices due to the weakening of the Oil choke collar.

  • the employment to population ratio was steady at 58.8%, and has risen 0.2% YoY. The labor force participation rate also remained steady at 63.0%, and has declined -0.5% YoY..  The usual  caveats about discouraged workers and Boomer retirements apply.
  • the number of people who are not in the labor force but want a job now (the best measure of long time discouragement) fell by -751,000 from 6,842,000 to 6,091,000.

To reiterate, this was a surprisingly decent report, both in the headline and in most of the internals.  But as indicated above, there are some cracks in the facade:  the manufacturing workweek appears to have peaked, as has the number of aggregate hours worked in the economy.  Further, although seasonality is supposed to be removed from these reports, typically since 2009 wintertime has produced the best reports, and this year the best that has been managed is this "average" report, so the YoY comparisons in growth are declining.  Plus, the decline in real retail sales in the last couple of months argues for a softening in the labor market in the next few months.

So, all in all, positive, but with some cyclical worries.