February’s Jobs Report Not Nearly as Good as Headline Job Growth Figures Suggested
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Jeoff Hall, Managing Economist, Refinitiv IFR comments:
The February Jobs Report Looks Great On The Surface
“We are giving the January jobs report a B-minus. The February jobs report looked great on the surface, with total nonfarm payrolls employment having jumped 379k on the month, more than twice the Reuters poll consensus forecast (+182k). Excluding the 86k decline in government employment, private payrolls expanded by 465k in February, also more than double the median market estimate (+210k). But consider that more than two-thirds (69.2%) of the 513k rise in private service-providing payrolls came from the beleaguered Leisure and Hospitality industry. It’s good to see these folks returning to work, but it is hardly an indication of underlying demand in the overall labor market. If not for the 355k contribution from this industry, which happens to have the lowest wages, total job growth in February would have been a piddly +24k.
In the goods-producing sector, employment fell by 48k in February after dropping 13k in January. That left the 3-month average of job growth in this sector at just +7k. Construction employment fell by 61k in February, the first drop in the 10 months since last April’s 1.022-mn plunge. It wiped out 85% of the net 72k increase over the previous three months. Factory employment rose 21k in February, edging past the consensus estimate (+18k), but only after a 14k drop a month earlier. The 3-month average of job growth in this industry is now +14k.
Among service-providing industries (other than Leisure and Hospitality), February job growth was rather mundane. It fell 3k in the Information industry and 5k in the Financial Activities industry. Wholesale trade eked out a 4k rise, the smallest gain in seven months. Retail trade employment rose 41k, which was decent by a host of comparisons. Transportation and warehousing gained 4k jobs, but that was the first increase in three months. The same can be said of Education and Health Services, which added 44k in February after losing an average 27k per month in December and January. Professional and Business Services employment continued to recover, but its 63k growth in February was the smallest in the last 10 months and roughly half the trailing 3-month average (+113k).
Unemployment Fell By 158k To 9.972 Mn
If we were looking at the Establishment survey alone, our grade would have been even lower. But the Household survey results raised the mark. Employment in that survey rose by 208k in February, slightly faster than the 201k addition in January and raising the 3-month moving average higher to +143k from +121k; the 3-month average in the Establishment survey was +80k in February, up from +41k in January. Total unemployment fell by 158k to 9.972 mn, the lowest since last March (7.185 mn), while the labor force rose 50k to 160.211 mn. That allowed the unemployment rate to drop one-tenth of a percentage point to 6.2%, also the lowest since last March (4.4%).
Some 897k were not at work in February due to bad weather, the most for any February since 2010 (1.032 mn) and more than three times the long-run average for February (296k). In February 2020, 190k were not at work due to bad weather.
The Bottom Line
The February Employment Situation Report had some positive attributes, but it was not nearly as good as the headline job growth figures suggested. We feel that the Leisure and Hospitality industry will continue to skew job growth higher in the coming months, but growth in other industries should also look better than it did in February.
Source: Refinitiv IFR