Thursday, March 07, 2019

February Employment Preview

by Calculated Risk on 3/07/2019 02:11:00 PM

On Friday at 8:30 AM ET, the BLS will release the employment report for February. The consensus is for an increase of 178,000 non-farm payroll jobs in February, and for the unemployment rate to decline to 3.9%.

Last month, the BLS reported 304,000 jobs added in January.

Here is a summary of recent data:

• The ADP employment report showed an increase of 183,000 private sector payroll jobs in February. This was close to consensus expectations of 180,000 private sector payroll jobs added. The ADP report hasn't been very useful in predicting the BLS report for any one month, but in general, this suggests employment growth close to expectations.

• The ISM manufacturing employment index decreased in February to 53.2%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll was unchanged in February. The ADP report indicated manufacturing jobs increased 17,000 in February.

The ISM non-manufacturing employment index decreased in February to 55.2%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll increased 210,000 in February.

Combined, the ISM surveys suggest employment gains slightly above the consensus expectations.

Initial weekly unemployment claims averaged 226,000 in February, up from 220,000 in January. For the BLS reference week (includes the 12th of the month), initial claims were at 217,000, up from 212,000 during the reference week the previous month.

The increase during the reference week suggests a weaker employment report in February than in January.

• The final February University of Michigan consumer sentiment index increased to 93.8 from the January reading of 91.2. Sentiment is frequently coincident with changes in the labor market, but there are other factors too like gasoline prices and politics.

• Government Shutdown: The unemployment rate should decline in February (government employees on furlough were counted as unemployed in the household survey, but as having a job in the establishment survey).

• Weather could negatively impact the February report.

• Conclusion:  In general these reports suggest a solid employment report.   There might be some negative impact from weather - and some February hiring might have happened in January (included in the strong report) - so my guess is job growth will be below consensus, but that the unemployment rate will decline to 3.8% or 3.9%.