Headline nonfarm payrolls rose by 235,000 in February, versus an anticipated 200,000. Meanwhile, January’s data point was revised upward to 238,000 respectively. The unemployment rate fell to 4.7%, while the participation rate was higher at 63.0%. There was a significant decline of 176,000 in the group classified as “not in the labour-force,” following a decrease of 736,000 in January. The U6 unemployment rate (an expanded measure of unemployment that takes into account marginally attached and part-time workers) was lower at 9.2% in February. The household survey showed an increase of 447,000 jobs in the month, following a decrease of 30,000 in January. Meanwhile, the adjusted household survey (the BLS’s attempt to make it more comparable to the payroll survey) pointed to an increase of 493,000 after a rise of 394,000 in January.
Private nonfarm average hourly earnings were 0.2% higher in February (0.2% for production and nonsupervisory workers) and follows 0.2% in January. Annually, they are now 2.8% higher (but only 2.5% for production and nonsupervisory workers); this indicates some upward pressure, but it is not intensifying. Private average weekly hours for production and nonsupervisory workers were unchanged for the sixth straight month; they are now also unchanged on a year ago. The 235,000 change in February’s payrolls was largely due to education and health service (62,000), construction (58,000), professional and business services (37,000), and leisure and hospitality (26,000). There was a decline in the retailing sector (26,000). Meanwhile, the mean duration of unemployment was flat at 25.1.
The trend rate of employment growth actually seems to be improving here, following a slowing in the trend rate through 2016. Whether this is due to the Trump effect (promises of lower regulation and taxes) or the economy itself finally turning a corner following a long hangover from the financial crisis is difficult to tell exactly. Nevertheless, we do know that business and consumer optimism is much higher following the election and that is a good start if it’s followed up with improving economic metrics, such as today’s jobs data. This optimism can be seen through the revival in the participation rate from 62.7% in December to 63.0%, in addition to the sharp drop in those considered to be not in the labour-force. Both of these related measures would suggest that workers who may have been considered as having completely given up on finding work are now stepping back in with the view to finding employment. If this pool of labour is indeed deeper than previously thought, it gives the Fed a little more leeway with regard to the timing of rate increases. Though from the Fed’s perspective, much will also depend on the speed at which wages rise. Today’s change in average hourly earnings was again nothing spectacular and comes after a slightly soggy change in January. On the whole, the labour market is now closer to full employment and pressure on wages is rising. For the Fed a change in rates was already a done deal and has been fully priced into the market, so this report was simply further confirmation in that expected outcome.
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Richard de Chazal, CFA is a London-based macroeconomist covering the U.S. economy and financial markets.