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Employment Situation: Sharp Decline Not a Trend-Changer

March 8, 2019
Bottom Line: Nonfarm payroll growth was just 20k in February, sharply less than expectations and January's growth, but the household employment survey used to calculate the unemployment rate showed solid gains after several slow months. This suggests there were data collection issues amid the government shutdown and harsh weather during the survey week for nonfarm payrolls. There were sharp declines in education and construction jobs, as well as declines in retail jobs. The less volatile professional and business services sector saw solid gains, again suggesting weather and other factors were at play in the more volatile sectors.

With the strong gains in the household employment survey the unemployment rate fell to 3.8% as the labor force tally declined slightly. Average hourly and weekly earnings growth was solid with the last three months averaging gains in-line or better than the 12-month averages.

Overall, there is not enough in this report to suggest any change in the trend towards overall tight labor markets.

Payroll Employment rose by 20k in February, compared with market expectations for an increase of 180k. The prior 2 months were revised, higher in January by 7k and higher in December by 5k.

Government jobs FELL by 5k. Consequently, private sector jobs ROSE by 25k. Overall employment is now 1.7% ABOVE its year ago level, Over the past 12 months, 2,509k jobs have been created.

  • In February, the job gains were in Trade, Transportation & Utilities (+8k with -6k of those in Retail Trade), Professional & Business Services (+42k with the addition of 5.8k in Temp Help Services), Education & Health Services (+23k), Financial Activities (+6k), Manufacturing (+4k), and Other Services (+3k).

  • Jobs were shed in Government (-5k), and Construction (-31k).

The Unemployment Rate FELL by 0.2 percentage points in February to 3.8%, compared with market expectations for a small decline to 3.9%.

Household employment rose by 255k while the labor force declined by 45k, resulting in a decrease in the number of unemployed of 300k.

The Labor Force Participation Rate was UNCHANGED at 63.2%. The Employment-Population Ratio was UNCHANGED at 60.7%.

The number of people Working Part-Time for Economic Reasons FELL by 835k to 4,244k. while Long-Term Unemployment ROSE by 19k to 1,271k (accounting for 20.4% of the unemployed), while the Mean Duration of Unemployment ROSE by 1.2 weeks to 21.7 weeks.

There are now 6.2 million people officially unemployed. In addition, there are another 5,222k people who say they want a job but are not currently looking for one. Finally, another 4,244k people are working part-time because of slack economic conditions.

The Index of Aggregate Hours FELL by 0.3%, combining the modest gain in private payroll employment and the shorter workweek.

Hourly Earnings ROSE by 0.4% in February, above market expectations of 0.3%. Hourly earnings are now 3.4% ABOVE their year ago level.

Weekly Earnings also ROSE by 0.1%, the result of the change in hourly earnings and a shorter workweek. Weekly earnings are now 3.1% ABOVE their year ago level.

The Average Workweek FELL by 0.1 to 34.4 hours, BELOW the market consensus at 34.5 hours.