A one-two punch of increasing payrolls and falling unemployment hit the wires this morning. Specifically, the U.S. Labor Department reported that non-farm payrolls jumped by 192,000 in February, just nominally below the consensus expectation of 200,000. The job creation figure was also materially better than the tepid 63,000 payroll increase tallied in January. (The January figure was initially reported as a gain of 36,000.) Also, the December payroll increase was revised to show a rise of 152,000 jobs; the earlier report had estimated a 121,000 payroll increase. In addition to this generally reassuring news, the government, in a bit of a surprise, reported that the unemployment rate fell from 9.1% in January to 8.9% in February. (Initially, the January jobless rate had been estimated at 9.0%.) Note that, as per usual, the February figures will be revised when the March data are put out, which will be on the first Friday of April.
Although we tend to give more credence to the non-farm payroll number, as it is less of a lagging indicator than the jobless data, we do note that this was the first time since May of 2009 that the unemployment rate had dipped below 9%. So, psychologically, at least, this is something of a break through. In a larger sense, the jobless rate must fall much further for a sense of optimism on this front to realistically set in, and that could be some time off.
As for other components in the report, the government reported that private sector jobs saw an increase of 222,000 last month, thereby correlating quite well with a survey issued on Wednesday by Automatic Data Processing in which it was reported that the data kept by that services giant saw an increase of 217,000 jobs last month. At the same time, Labor reported that government jobs fell by 30,000 in February. In addition, average hourly wages rose by a scant penny last month--much less than the January increase--while average hours worked over the course of a week, came in unchanged at 34.2. That also was not an uplifting issuance.
As for employment changes by industry, the government noted than manufacturing jobs continued their ascent, rising by 33,000 last month. Almost all of that increase came in the durable goods industries, including machinery and fabricated metals, which saw respective job growth of 9,000 and 7,000. All told, manufacturing now has added 195,000 jobs since this sector's cyclical trough set in during December of 2009. At the same time, we saw an increase of 33,000 jobs, as well, in construction last month, following a 22,000 decline in January. That earlier setback, however, was probably weather related. Thus, the sharp month-to-month swing was something of an aberration, in our opinion.
Furthermore, employment in the services sector continued to expand, rising by 47,000 last month, while health care sector jobs surged by 34,000. Transportation and warehousing jobs, meantime, also rose last month, gaining 22,000. As noted, jobs in the state and local government area fell, as these states and municipalities continue to generally grapple with outsized budget deficits.
All in all, it was a decent report, and one that does nothing, in our view, to dampen the optimism about economic growth in the current quarter, which we still expect to easily reach 3.5%, if not a little higher. The employment data also are in line with other recent releases in the areas of chain store sales, personal income, manufacturing, and non-manufacturing activity. The weak link in the economic chain remains housing, where a real turnaround may yet have to be measured in years not months.
At the time of this article's writing, the author did not have positions in any of the companies mentioned.