by: Zach Bethune, Thomas Cooley, Peter Rupert
According to the Bureau of Labor Statistics establishment survey, employment increased 295,000 from January to February and has increased by about 3.3 million since February 2014. January employment was revised down slightly by 18,000 and December had no revision. This continues the trend of strong employment growth consistent with an an ongoing robust recovery. The unemployment rate fell further to 5.5% average weekly hours were flat and average hourly earnings rose only slightly.
Job gains were robust, only mining and logging, non-durable goods, and temporary help services saw small declines. Is the decline in temporary help services, for the second month in a row, a signal of underlying strength in that firms are relying more on full-time workers rather than temps? Maybe, but, as the chart below shows, as a fraction of total employment, firms use temp help much less during downturns. Moreover, the use of temp services has doubled relative to total employment since the early 1990’s.
Average weekly hours have remained fixed at 34.6 for the past 5 months after being stuck at 34.5 for the previous 7 months. Average hourly earnings rose only slightly from $24.75 to $24.78.
While the establishment survey provided solid numbers, the household survey provided some mixed messages. True, the unemployment rate fell from 5.7% to 5.5%.
But the labor force fell by 178,000 leading to a decline in labor force participation from 62.9 to 62.8 and no change in the employment to population ratio at 59.3.
The number of persons working part time for economic reasons fell by 175,000, with 165,000 fewer reporting slack work reasons. The number of persons reporting part time for non-economic reasons increased by 15,000.
All of this seems to provide further support for the view that the Fed should begin normalizing monetary policy sooner rather than later. Although recent communications have emphasized the view that they could be “patient,” we expect that language to disappear. The graphs below show the continued strength in the labor market, albeit slower than coming out of previous recessions.