Sunday, March 6, 2016

February jobs- good overall numbers, but problems below

I'm back in the states, and I have a few takes on the February 2016 U.S. jobs report that was released on Friday.

1. The topline numbers look great- 242,000 seasonally-adjusted jobs added in the last month, and the previous two months were revised up by 30,000 for the previous 2 months, for a total increase of 272,000. The unemployment rate stayed at 4.9%, but more impressively, the seasonally-adjusted labor force and "employed" figures were both up by over 500,000 for the month. The Employment-Population-Ration is now knocking on door of 60% for first time in 7 years, even with more Boomers retiring and keeping a relative lid on that statistic.

The strong US jobs report and the upwards revision for December makes Wisconsin fall even further behind, with the Walker jobs gap now reaching 106,000 private sector jobs at the end of 2015, and 101,000 overall. Worse, there was a large growth in that gap over the last year, and that may get even larger after the Wisconsin figures are benchmarked next week.

But underneath the gaudy U.S. job growth numbers, there is a problem lurking. 16,000 jobs lost in manufacturing, giving back most of the gains from January, and dropping the total growth in manufacturing jobs to only 12,000 nationwide over the last year. In addition, over 19,000 jobs were lost in Mining and other oil-related industries, continuing that sector's recession. The majority of the increase in jobs were in three areas- health care and social assistance (+57,200), retail (+54,900) and bars and restaurants (+40,200).

This means many of the jobs being added don't pay all that much, and those job figures were belied by the wage numbers for February. Hourly wages dropped 3 cents an hour, average private sector weekly earnings dropped by more than $6, and weekly private sector earnings growth is barely above 1.6% in the last year...before we account for inflation. And now with 12-month inflation rising to its highest level in more than a year, with oil and gas prices starting to bounce off the bottom, will we now see a decline in real earnings growth in the coming months?

Yes, on the big picture, things are still very good, and this jobs report should allay any fears that the 7-year economic recovery is over. But that same February report showed certain areas of the economy are lagging, especially in producing goods, and the still-stagnant wage growth is a bad sign for things ahead. Any wonder why Donald Trump is taking advantage of this area of economic insecurity with (legitimate) complaints about trade policy and (the illegitimate) blaming of "others" for their flatlining job prospects?

So despite the positive headlines and return to sizable job growth, I still see a warning sign from what came out on Friday, and let's see if the full-employment growth drags wages up, or the low wage growth slows employment down. Feels like it'll be one or other that will emerge as dominant soon.

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