The knee-jerk headlines are certainly alarming enough. February’s payroll growth of only 20,000 was still well short of expectations for 180,000 new payrolls, all but requiring the Federal Reserve to suspend its suggested plans for rate hikes this year. The economy is just too weak.
As has been the case for the past two years though, the headlines are largely formed by a politically-biased crowd. Some are ‘accentuating the positive,’ while others are only interested in using select data to stoke fear. As is usually the case, the truth is somewhere in the middle.
And, February’s truth is, aside from a lackluster payroll growth figure, everything else looks quite healthy… to the extent one can ferret out the impact of the federal government shutdown, which ended in late January.
But, first things first.
It was, undoubtedly, a screwy set of figures. The 20,000 jobs created last month were well short of the 180,000 economist has modeled, but January’s original tally was revised upward to 311,000. All told, the economy made enough net progress to push January’s unemployment rate down from 4.0% to 3.8%.
It’s a two-month set of numbers that some, as was noted, are suggesting overstate the true health of the economy and the jobs market. Other key data, however, says matters remain encouraging.
Chief among that data is the number of U.S. residents with jobs, the number without, and the number of people who aren’t actively looking for employment but would still like to work.
As of the end of last month, 156.95 million U.S. residents were working, up from January’s surprisingly modest lull, and just eclipsing what was a record figure for December. Simultaneously, people who are officially unemployed – receiving benefits of some sort – fell 6.53 million to 6.24 million, curbing what looked like growth from last year’s multi-year low levels. And, for the third month in a row, the number of people not in the labor force but interested in a job fell, to 5.22 million. That figure is also within reach of the early-2011 multi-year low of 5.11 million.
Even more telling are the ratios… the percent of the population that’s counted as being in the workforce (whether employed or not), and the percent of the population that’s employed. Both came in at January’s figures, not making forward progress, but not losing ground either. As of February, 63.2% of the population is in the labor pool, and 60.7% of the population has a job. Last month’s solid numbers extend a streak of progress that’s been in place for a while.
Perhaps the biggest litmus test of all, however, is wages. They were up 3.4% year-over-year, marking a multi-month growth streak that appears to be picking up steam.
The graphic of hourly wages below is only updated through January, with the exception of the average workweek at the bottom. Note that employers aren’t cutting hours to offset the added expense of higher wages.
There’s little not to like about the February jobs report. Many have been critical all the same, but those criticisms are nothing new. Any measurable progress has been deemed as unsustainable and temporary – as has been the case for the overall economy – but the economy and jobs have been climbing that wall of worry for months now. Like it or not, there’s no tangible evidence that a recession is brewing.
Indeed, with inflation being non-existent everywhere except for employers looking for workers, the postponement of any discussed interest rate hikes only bolsters the bullish case.
In school-grade terms, February’s jobs report earns an A-, and would have scored even better had the payroll growth number been better. As was noted though, the government shutdown made it something of a coin-toss that meant little to begin with.