February Employment Tops All Estimates

By Thomas Cooley and Peter Rupert

The February payroll employment numbers crushed all preliminary forecasts (in the 200k ballpark) by increasing 313,000. In addition, January employment was revised up 39,000 from the first estimate and December revised up 15,000 from the second estimate. The increase in private payrolls was 287,000 with government employment rising 26,000. Employment in the goods sector increased 100,000. The only significant decline came in the service producing information sector, declining 12,000 and has seen three consecutive months of declining employment.


As in the past most of the employment growth was in the service sector continuing a shift in the structure of the economy that has been on-going for many years. Manufacturing remains relatively flat, well below levels of a decade ago. The more volatile mining and construction sector both improved.

Average weekly hours ticked up from 34.4. to 34.5 and average hourly earnings barely changed, rising from $26.71 to $26.75. The increase in average hours implies that workers paychecks increased in the quarter. Average hourly earnings are up 2.6% year over year and the CPI up 2.1% from a year ago (January to January in the case of the CPI).


The household survey release reveals a 806,000 increase in the labor force, 785,000 of that from employment and 22,000 more unemployed, leading to almost no change in the 4.1% unemployment rate. Those not in the labor force declined by 653,000. The employment population ratio increased to 60.4%, moving up from historic lows.

The strong job growth most likely reflects business optimism because of the tax cuts and regulation role backs. In additional, we have entered a period in which most of the worlds developed economies are growing in sync. The new Fed Chairman Jerome Powell has signaled the he is open to increasing interest rates several time this year. The very strong labor market gives him cover for that view but the modest rise in hourly earnings is a factor that will have to be considered as well.

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