Talk about beating expectations. Economists had expected to see another maintenance-plus level of job creation in February at around a net 200,000 jobs added. Instead, the US economy had its best month since 2016, adding 313,000 jobs in the middle of winter. Construction and retail led the way in the massive boost:
Total nonfarm payroll employment increased by 313,000 in February, and the unemployment rate was unchanged at 4.1 percent, the U.S. Bureau of Labor Statistics reported today. Employment rose in construction, retail trade, professional and business services, manufacturing, financial activities, and mining. …
Among the major worker groups, the unemployment rate for Blacks declined to 6.9 percent in February, while the jobless rates for adult men (3.7 percent), adult women (3.8 percent), teenagers (14.4 percent), Whites (3.7 percent), Asians (2.9 percent), and Hispanics (4.9 percent) showed little change.
The drop in African-American unemployment is worth noting, mainly because the White House has been particularly focused on this as a metric. Donald Trump bragged about a sharp decline in this measure during his State of the Union address in January, only to see it tick back up again. This report shows the lowest level of unemployed blacks by numbers as well as a percentage since 2001 at 558,000. Expect to hear more bragging from the White House over that number.
The job creation numbers come from the Establishment survey, though, while the other metrics come out of the Household survey (which is essentially a phone poll). That makes the job creation numbers solid, but there are a couple of anomalies in the Household data. The survey claims that 806,000 re-entered the workforce and 653,000 left the “not in labor force” statuses in February; both metrics usually see changes on a smaller scale. The sharp adjustments in both are why the U-3 unemployment rate remained nominally constant at 4.1% rather than drop with the addition of so many new jobs.
Momentum looks good on the longer range, too. The revisions from the previous two months both added jobs to the previous estimates, 15,000 in December and 39,000 in January. The three-month rolling average is now 242,000, a robust pace if not exactly the breakout level seen this month.
Wages continued to go up, but at a slower pace than in January:
The average workweek for all employees on private nonfarm payrolls rose by 0.1 hour to 34.5 hours in February. In manufacturing, the workweek increased by 0.2 hour to 41.0 hours, while overtime edged up by 0.1 hour to 3.6 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls increased by 0.2 hour to 33.8 hours. (See tables B-2 and B-7.)
In February, average hourly earnings for all employees on private nonfarm payrolls rose by 4 cents to $26.75, following a 7-cent gain in January. Over the year, average hourly earnings have increased by 68 cents, or 2.6 percent. Average hourly earnings of private-sector production and nonsupervisory employees increased by 6 cents to $22.40 in February.
That’s not exactly encouraging, although it’s a bit better than the earlier stagnation. Last month’s wage growth suggested that we really had used up our slack labor and that competition had increased to the point where we might reach full employment. Having 313,000 jobs added with low wage growth suggests just the opposite, as CNBC also notes more optimistically as a Goldilocks economy:
The surge in job creation coming without an accompanying rise in wage pressures fits in well with the Wall Street hopes of a “Goldilocks” economy, and stock market futures surged following the Bureau of Labor Statistics report.
“The labor market tightens but wage growth moderated. Good news for both sides of the street, Main Street and Wall Street,” said Quincy Krosby, chief market strategist at Prudential Financial.
Well, maybe, but workers whose wages stagnated for more than a decade might be anxious to see competition turn into pressure for real wage growth. However, as Christopher Rugaber concludes at the Associated Press, workers appear poised for significant growth with both jobs and the tax cuts having their impact — and being related as well:
The surge of job gains may reflect, in part, confidence among some businesses that the Trump administration’s tax cuts will accelerate growth. Consumers are also benefiting from higher after-tax income, which grew last month at the fastest pace in a year, aided by the tax cuts. …
For now, consumers have pulled back somewhat on spending despite income gains, thereby setting the stage for potentially stronger spending gains in coming months. After-tax incomes in January — which include benefit payments from the government and business income as well as wages — climbed by the most in a year. They were boosted, in part, by the Trump administration’s tax cuts and company bonuses that were paid out in response to corporate tax cuts.
And manufacturers expanded at the fastest pace in nearly 14 years in February, according to a survey of purchasing managers.
In other words, effective compensation growth has come in both directions. If job creation can continue at this pace, then wage growth will eventually result from the competition over scarce labor, which is the best way to organically grow wages. This report is a big win for the White House, and they won’t be shy in proclaiming it — nor should they be.