February Payrolls Up 313,000, Unemployment Rate Steady at 4.1 Percent
- Payroll Employment increased by 313,000 jobs in February, well above expectations.
- The Unemployment Rate for February was unchanged at 4.1 percent.
- Average Hourly Earnings increased by 0.1 percent in February after a stronger gain in January.
- The Average Workweek in February increased to 34.5 hours.
We had a whopper of a payroll number in February with nonfarm employment up by 313,000 for the month and upward revisions totaling 54,000 for the previous two months. That means relative to consensus expectations of about +200,000 for February payrolls, we now see an additional 167,000 people employed, roughly another month’s gain. Average hourly earnings were up only 0.1 percent, after gaining 0.3 percent last month. The average workweek increased by a tenth to 34.5 hours. So we have a lot more workers working longer hours for more wages. This is very positive for 2018 real GDP growth. The separate household survey of employment showed a huge 806,000 net new jobs added in February. This survey often shows periodic spikes in employment. The civilian labor force had another strong month, increasing by 785,000 after a 409,000 person gain in January. The large increases in employment by household and in the labor force offset each other in the unemployment rate calculation. The unemployment rate stayed at 4.1 percent for the fifth consecutive month. We still expect it to decrease to the upper three percent range this year.
The establishment data show broad-based job gains. The mining sector added 8,000 net new jobs in February. Construction was very strong, building by 61,000 net new jobs (20,000 would have been a good month). Manufacturing employment was up by a sizeable 31,000 jobs in February. A year ago we were expecting to see declines in manufacturing employment by this point. Noteworthy is Ford’s recent announcement that they will be laying off about 2,000 workers in Michigan temporarily later this year in order to retool for new models. Wholesale trade added 5,800 workers. Retail trade was weak over the winter, but bounced back in February, adding 50,300 net new jobs. Transportation and warehousing added 15,400 jobs. Information services gave up 12,000. Financial services added 28,000 net new jobs in February, the strongest monthly gain in a year. Professional and business services gained a solid 50,000. Education and healthcare added 23,000, which is relatively low. Leisure and hospitality industries served up another 16,000 net new jobs in February. The government sector caught up after a weak year in 2017, adding 26,000 net new jobs in February.
Given the fact that wages (average hourly earnings) were calm this month after a hot January, the February Employment Report does not immediately put pressure on the Fed to think about a fourth fed funds rate hike this year. However, the strong job numbers are eye catching and will sensitize the Fed to the possibility that the U.S. economy may be accelerating late in the business cycle, potentially leading to more inflation later this year.
Market Reaction: U.S. equity markets opened with gains. The 10-Year T-bond yield is up to 2.90 percent. NYMEX crude oil is up to $61.00/barrel. Natural gas futures are down to $2.74/mmbtu.
For a PDF version of this report click here: Employment-03092018.
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