In Depth Analysis: CalculatedRisk Newsletter on Real Estate (Ad Free) Read it here.

Thursday, March 05, 2020

February Employment Preview

by Calculated Risk on 3/05/2020 11:37:00 AM

Special Note: The 2020 Decennial Census will increase hiring in early 2020. In reporting the employment report, the headline number should be reduced (or increased) by the change in Census temporary employment to show the underlying trend.  Based on previous Census hiring, I expect the Census hired 10 to 20 thousand temporary workers in February.

On Friday at 8:30 AM ET, the BLS will release the employment report for February. The consensus is for an increase of 175,000 non-farm payroll jobs, and for the unemployment rate to be unchanged at 3.6%.

Last month, the BLS reported 225,000 jobs added in January (220,000 ex-Census).

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 above consensus expectations of 170,000 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 somewhat above expectations.

• The ISM manufacturing employment index increased in February to 46.9%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll decreased around 35,000 in February. The ADP report indicated manufacturing jobs decreased 4,000 in February.

The ISM non-manufacturing employment index increased in February to 55.6%. A historical correlation between the ISM non-manufacturing employment index and the BLS employment report for non-manufacturing, suggests that private sector BLS non-manufacturing payroll increased 225,000 in February.

Combined, the ISM surveys suggest employment gains at 190,000, suggesting gains somewhat above consensus expectations.

Initial weekly unemployment claims averaged 213,000 in February, up slightly from 212,000 in January. For the BLS reference week (includes the 12th of the month), initial claims were at 211,000, down from 223,000 during the reference week the previous month.

This suggests fewer layoffs (during the reference week) in February than in January.

• The final February University of Michigan consumer sentiment index increased to 101.0 from the January reading of 99.8. Sentiment is frequently coincident with changes in the labor market, but there are other factors too like gasoline prices and politics.

• The BofA job tracker decreased in February to 144,000, down from 161,000 in January, suggesting fewer jobs added in February.  This suggests job growth below consensus.

• Weather: The weather was mostly warm and dry during the reference period in January, and the San Francisco Fed estimates the favorable weather boosted employment gains in January by about 100,000.  It is likely some hiring for February was pulled forward to January, suggesting some payback in the February report.

• Conclusion: In general the various reports suggest employment growth somewhat above expectations, however, factoring in some payback from the nice January weather, I expect employment gains, ex-Census hiring, below expectations.