Wednesday’s ADP report set expectations high for today’s release from the Bureau of Labor Statistics, but the February jobs report turned out to be more mundane than spectacular. The US economy added 235,000 jobs last month, about the same as in January, while the unemployment rate remained level at 4.7%. Rather than a spike, the month produced continuity:
Total nonfarm payroll employment increased by 235,000 in February, and the unemployment rate was little changed at 4.7 percent, the U.S. Bureau of Labor Statistics reported today. Employment gains occurred in construction, private educational services, manufacturing, health care, and mining.
ADP’s projection of 298,000 jobs added overshot the mark by quite a bit — another reminder that ADP isn’t a completely reliable indicator. Instead of a blowout, we got a repeat from the previous month of a solid maintenance-plus performance, but not an indication of breakout job creation.
Most of the numbers are positive, though. The civilian labor force grew by 340,000, and those not in the labor force dropped by 176,000. The civilian participation rate and the employment-population ratio both ticked up by a tenth of a point, a move in the right direction if not a spectacular shift. The latter’s 60.0% is its highest level in eight years. Wages grew again, but hours remained the same.
The U-3 unemployment rate of 4.7% has been lower, but U-3 is not the best measure for unemployment. The U-6 rate calculates marginalized workers and offers a better overall picture, and that dropped two-tenths of a point to 9.2%. That’s the best level since April 2007.
Where did the jobs get added? Manufacturing was one sector with significant gains, as was construction:
In February, construction employment increased by 58,000, with gains in specialty trade contractors (+36,000) and in heavy and civil engineering construction (+15,000). Construction has added 177,000 jobs over the past 6 months.
Employment in private educational services rose by 29,000 in February, following little change in the prior month (-5,000). Over the year, employment in the industry has grown by 105,000.
Manufacturing added 28,000 jobs in February. Employment rose in food manufacturing (+9,000) and machinery (+7,000) but fell in transportation equipment (-6,000). Over the past 3 months, manufacturing has added 57,000 jobs.
One point to bear in mind about construction is the mild winter we had in February, and January for that matter, too. Some construction work may have shifted from the spring into last month, which could mean either more work all year long in this sector, or that there will be fewer jobs than usual later in the year. Much of that depends on whether the US economy picks up in a big way.
Still, the overall impression of this report is that the status quo of incremental improvement continued in February. Despite the optimism heard from corporate America over the promise of rapid growth through deregulation and better tax policies, it has yet to translate into a jobs boom. It’s a reminder that job growth is a lagging indicator, and businesses need to see the resources first before they go far out on a limb to add costs.
Associated Press analyst Christopher Rugaber gives it a thumbs-up, but notes that the Federal Reserve looms in the background:
U.S. employers added a robust 235,000 jobs in February and raised pay at a healthy pace, evidence that the economy remains on solid footing nearly eight years after the Great Recession ended.
The unemployment rate dipped to a low 4.7 percent from 4.8 percent, the Labor Department reported Friday. More people began looking for jobs, increasing the proportion of Americans working or looking for work to the highest level in nearly a year.
The strong job growth, decent pay gains and low unemployment rate make it all but certain that the Federal Reserve will raise short-term interest rates when it meets next week.
Rugaber also points out that the wage growth might have been artificial rather than an organic indicator of the economy:
At the start of 2017, minimum wages rose again in 19 states, a trend that might have helped raise pay last month.
The takeaway from this report is that we shouldn’t expect a big impact on actual hiring in advance of action by Republicans to make the tax and regulatory environment more amenable to job creation. Employers may be enthusiastic about expansion and success in the next four years under Republican policies, but those policies have to get put in place first.