The US economy had another month of relatively strong job creation, adding 295,000 jobs in February while reducing the nominal unemployment level to 5.5%. It’s the fourth month in a row of good numbers, although January’s previous 257,000 level was revised downward to 239,000 by the BLS. The status of workforce participation didn’t budge from its 36-year low, however, and recent economic indicators may signal tighter times ahead for American workers:

Total nonfarm payroll employment increased by 295,000 in February, and the unemployment rate edged down to 5.5 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in food services and drinking places,
professional and business services, construction, health care, and in transportation and warehousing. Employment in mining was down over the month.

Both the unemployment rate (5.5 percent) and the number of unemployed persons (8.7 million) edged down in February. Over the year, the unemployment rate and the number of unemployed persons were down by 1.2 percentage points and 1.7 million, respectively. (See table A-1.)

Among the major worker groups, the unemployment rate for teenagers decreased by 1.7 percentage points to 17.1 percent in February. The jobless rates for adult men (5.2 percent), adult women (4.9 percent), whites (4.7 percent), blacks (10.4 percent), Asians (4.0 percent), and Hispanics (6.6 percent) showed little or no change.

The US economy needs to add around 150,000 jobs a month to keep up with population growth. Until 2014, job creation had largely only done that — kept pace. Over the last several months, though, we are seeing actual job growth, even if it’s not spectacular. One would expect to see that impact the workforce participation rate, but so far it hasn’t. The labor force participation rate didn’t change at all, though, even with the boost in job creation:

The civilian labor force participation rate, at 62.8 percent, changed little in February and has remained within a narrow range of 62.7 to 62.9 percent since April 2014. The employment-population ratio was unchanged at 59.3 percent in February but is up by 0.5 percentage point over the year.

The numbers of those not in the labor force, seasonally adjusted, continued to grow as well (Household survey, A-1). In February it hit 92.9 million people, up 1.5 million people from a year earlier and 3.45 million from February 2013. It rose 354,000 just in the past month, outstripping the 295,000 jobs added. This tends to grow anyway, but the rate at which it’s growing shows why the U-3 and even U-6 may not be capturing the real scope of the labor problem in the US.

For instance, in the two year period before the recession (Feb 2005 to Feb 2007), this number only grew by 1.2 million — a third of what we’ve seen in the past two years of “recovery.” Unless population growth is skyrocketing, we still have a major chronic problem with the unemployed. And if population growth is skyrocketing, then 150,000 is no longer our base.

The U-3 number dropped to 5.5% as noted by the BLS in its statement. The U-6 number, which provides a better look at unemployment for the larger population, dropped three-tenths of a point to 11.0%, the largest one-month drop since September of last year. February’s U-6 is the lowest since Septemer 2008, when the financial crisis erupted and the recession turned into a historic shock. Previous to the beginning of the 2007-9 recession, U-6 levels typically ran in the 8-9% range. We are heading in the right direction, but we aren’t there yet.

Other economic indicators suggest that we may end up slowing down rather than speeding up, too. Yesterday, Commerce reported that new orders for manufactured goods in January dropped by 0.2%, and excluding transportation, the drop was more pronounced at 1.8%. That was the fifth decrease in a row for manufacturing. Durable goods orders rose 2.8%, but that followed a 3.7% decrease in December. Non-durable goods orders dropped 3.1%. Overall, the year-on-year change was -4.1%, and -5.7% excluding transportation.

The Associated Press’ Christopher Rugaber takes a cautiously optimistic tone with today’s jobs report:

The Labor Department said Friday that the unemployment rate fell to 5.5 percent from 5.7 percent. But the decline in the rate occurred mainly because some people out of work stopped looking for jobs and were no longer counted as unemployed.

The strong job gains weren’t enough to boost wages by much. The average hourly wage rose just 3 cents in February to $24.78 an hour.

Still, over the past 12 months, 3.3 million more Americans have gotten jobs. More jobs and lower gas prices have led many consumers to step up spending. That’s boosting the economy, offsetting sluggish economies overseas and giving employers the confidence to hire.

We’re still doing a lot better than Europe, but the growing number of people outside the workforce should be a big concern. Even bigger should be our concern that our top-line metrics are ignoring and disguising that problem.