Sunday, March 12, 2017

Good February jobs report, but will it cool with the March weather?

Friday featured another US jobs report, and it ended up being a very good one.
Total nonfarm payroll employment increased by 235,000 in February. Job gains occurred in construction, private educational services, manufacturing, health care, and mining.

In February, construction employment increased by 58,000, with gains in specialty trade contractors (+36,000) and in heavy and civil engineering construction (+15,000). Construction has added 177,000 jobs over the past 6 months.

Employment in private educational services rose by 29,000 in February, following little change in the prior month (-5,000). Over the year, employment in the industry has grown by 105,000.

Manufacturing added 28,000 jobs in February. Employment rose in food manufacturing (+9,000) and machinery (+7,000) but fell in transportation equipment (-6,000). Over the past 3 months, manufacturing has added 57,000 jobs.
The construction and manufacturing pickup is very welcome, and if it's sustained, it's going to fill in a part of the economy that had fallen behind in 2015 and 2016.

But I'd add a note of caution to those strong construction and manufacturing numbers, as they happened in the 2nd warmest February on record in the US, with record warmth in 1/3 of the country's states. That could well have pulled hiring ahead in weather-related areas of those sectors, although there likely is strength underlying some of that.

Construction and manufacturing employment, Dec 2016-Feb 2017
Seasonally adjusted +98,000
Non-seasonally adjusted -185,000

Seasonally-adjusted +39,000
Non-seasonally adjusted -40,000

So now that the snow is flying again in March, let's see if that is reflected in "disappointing" numbers in those sectors, since the hiring that would usually happen in March and April may have already happened.

While the jobs report is largely positive, let's also note that retail employment dropped by 26,000 on a seasonally-adjusted basis, with 19,300 of those losses in "general merchandise stores." Yes, some of that reflects larger-than-normal seasonal layoffs after Christmas, but it also doesn't seem likely to improve any time soon, as numerous retailers have announced high amounts of store closings in recent months, as part of a structural shift away from brick-and-mortar stores and more people willing to buy things online.

The unemployment rate side of the monthly jobs report also looked good, as the unemployment rate dropped from 4.8% to 4.7%, as the number of people "employed" and in the labor force both went up by hundreds of thousands of people. Perhaps some of that was also the warm weather, but I'll give the benefit of the doubt and say that things went well in February. Let's see where it goes from here, and if there is any room to the upside.

Naturally, the Trump Administration took credit for the very good jobs report, despite the fact that no new economic policies have generally been changed from the Obama era other than a handful of executive orders. And naturally, actual facts and numbers made the Trump people sound really lame.

Hard to see any Trump bump in these numbers. Nearly identical to last two Febs.
Feb. 2015: 238K
Feb 2016: 237K
Feb. 2017: 235K

— Ben White (@morningmoneyben) March 10, 2017

Bottom line, the US jobs market is still in a pretty good place. But the next three months will seem to give us a better idea whether we return to a strong 2014-2015 rate of job growth, or revert back to the lower levels of 2016.

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