Friday, March 06, 2020

Comments on February Employment Report

by Calculated Risk on 3/06/2020 10:41:00 AM

The headline jobs number at 273 thousand for February was well above consensus expectations of 175 thousand, and the previous two months were revised up 85 thousand, combined. The unemployment rate decreased to 3.5%. Note: It appears weather boosted employment in February - I'll have more on this later.

Earlier: February Employment Report: 273,000 Jobs Added (266,000 ex-Census), 3.5% Unemployment Rate

In February, the year-over-year employment change was 2.409 million jobs including Census hires.

Average Hourly Earnings

Wage growth was at expectations. From the BLS:

"In February, average hourly earnings for all employees on private nonfarm payrolls increased by 9 cents to $28.52. Over the past 12 months, average hourly earnings have increased by 3.0 percent."
Wages CES, Nominal and RealThis graph is based on “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka "Establishment") monthly employment report. Note: There are also two quarterly sources for earnings data: 1) “Hourly Compensation,” from the BLS’s Productivity and Costs; and 2) the Employment Cost Index which includes wage/salary and benefit compensation.

The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees.  Nominal wage growth was at 3.0% YoY in February.

Wage growth had been generally trending up, but weakened in 2019 and early 2020.

Prime (25 to 54 Years Old) Participation

Employment Population Ratio, 25 to 54Since the overall participation rate has declined due to cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old.

In the earlier period the participation rate for this group was trending up as women joined the labor force. Since the early '90s, the participation rate moved more sideways, with a downward drift starting around '00 - and with ups and downs related to the business cycle.

The 25 to 54 participation rate decreased in February to 83.0%, and the 25 to 54 employment population ratio decreased to 80.5%.

Part Time for Economic Reasons

Part Time WorkersFrom the BLS report:
"The number of persons employed part time for economic reasons, at 4.3 million, changed little in February. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs."
The number of persons working part time for economic reasons increased in February to 4.318 million from 4.182 million in January.   The number of persons working part time for economic reason has been generally trending down.

Part time workers will be something to watch over the next several months.

These workers are included in the alternate measure of labor underutilization (U-6) that increased to 7.0% in February.

Unemployed over 26 Weeks

Unemployed Over 26 WeeksThis graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 1.102 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 1.166 million in January.

This was the lowest level for long term unemployed since December 2006.

Summary:

The headline jobs number was well above expectations, and the previous two months were revised up.  The headline unemployment rate decreased to 3.5%; however wage growth slowed to 3.0% year-over-year. Overall this was a solid report, although there was probably some boost from the weather.