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Economy in Brief

U.S. Employment Increase is Unexpectedly Strong; Jobless Rate Falls to New Low
by Tom Moeller  March 6, 2015

Improvement in the labor market continues firm. Nonfarm payroll employment during February increased 295,000 (2.3% y/y) following a 239,000 January rise, revised from 257,000. The latest advance compared to expectations for 240,000 in the Action Economics Forecast Survey. Job growth was led by strength in the private services sector. It was accompanied by a diminished 0.1% rise (2.0% y/y) in average hourly earnings. A 0.2% gain was expected. The unemployment rate declined to 5.5%, the lowest level since May 2008. Expectations were for 5.6%. The overall unemployment rate, including marginally attached workers and those employed part-time for economic reasons, declined to 11.0%.

From the payroll survey, the 295,000 jobs increase reflected a diminished 8,000 gain (1.7% y/y) in factory sector jobs. Three-month growth also weakened to 16,000. Construction sector hiring eased to 29,000 (5.3% y/y), although the three-month advance held at 41,000, it strongest since early-2006. Private service sector jobs grew 259,000 (2.7% y/y), but three-month growth backed off slightly to 229,000. Leisure & hospitality employment led the gain with a 66,000 increase (3.6% y/y). Trade, transportation & utilities jobs followed with a 62,000 rise (2.4% y/y), paced by a 32,000 increase (2.1% y/y) in retail trade. Education & health services employment rose 54,000 (2.5% y/y) led by a 32,800 rise (2.6% y/y) in health care & social assistance. Professional & business services jobs grew 51,000 (3.5% y/y) reflecting a 31,800 gain (3.6% y/y) in professional & technical services. Temporary hiring fell 7,800 (+5.2% y/y), down for the second straight month. Financial sector employment rose 10,000 (1.9% y/y) and information sector jobs rose 7,000 (2.2% y/y). Government sector jobs continued a moderate expansion following cutbacks through 2013. Local government jobs led with a 4,000 increase (0.5% y/y) followed by a 3,000 rise (0.4% y/y) in state government hiring. Federal government jobs were unchanged both m/m and y/y following declines until the end of last year.

The breadth of job market growth diminished to 62.4% of all industries last month from November's high of 73.3%. Over the last three months, however, 77.6% of industries raised head-counts, down just slightly from the recovery high. In the factory sector, a lessened 58.1% of industries raised employment but 76.3% did in the last three months.

The length of the average workweek held steady at a cycle-high of 34.6 hours for the fifth straight month. Mining & logging workers led with a length of 44.6 hours. The factory sector followed with a 41.0 hour week and the construction workweek was 39.6 hours. The private service sector workweek was the shortest at 33.4 hours, but financial sector workers posted a 37.4 hour week compared to 26.4 hours in the leisure & hospitality sector. Aggregate hours worked (employment time hours) rose 0.2% (3.3% y/y) last month and at a 2.4% annual rate so far in Q1. That followed a 4.1% rise in Q4 2014.

Average hourly earnings posted a disappointing 0.1% uptick (2.0% y/y) after the 0.5% January spurt. Construction sector earnings held back the total with a 0.3% decline (1.4% y/y). Factory sector earnings gained 0.2% (1.3% y/y), half the prior month's rise. Private service producing earnings increased 0.2% (2.2% y/y) following a 0.6% increase. Leisure & hospitality earnings continued to pace this group with a 0.4% rise (3.2% y/y) followed by information sector earnings which rose 0.2% (3.1% y/y). Professional & business services earning ticked 0.1% higher (2.5% y/y) as did education & health services earnings (1.9% y/y).

From the household employment survey, the decline in the unemployment rate to 5.5% reflected a 96,000 worker gain (2.1% y/y) in employment and a 178,000 decline in the labor force (+0.8% y/y). The noninstitutional population rose 0.1% to 249.9 million (1.1% y/y); therefore, the labor force participation rate slipped to 62.8%, near its record low. The participation rate for adult men slipped to 72.0% while for adult women it edged down to 58.1%.

The average duration of unemployment fell to a recovery low of 31.7 weeks versus 40.6 weeks at the cycle peak. The percent out of work for 52 weeks or more fell to 19.6% versus 32.4% at the cycle high.

The unemployment rate for individuals with less than a high school diploma slipped to 8.4%, nearly half the 2009 high. The jobless rate for those with a high school diploma but no college held at 5.4% versus the 11.0% high. Individuals with less than a bachelors degree saw 5.1% joblessness versus 8.9% at the high and those with a degree or higher realized 2.7% unemployment versus a 4.9% high.

The labor market data is contained Haver's USECON database. The expectations figure is in the AS1REPNA database.

Employment: (M/M Chg., 000s) Feb Jan Dec Y/Y 2014 2013 2012
Payroll Employment 295 239 329 2.3% 1.9% 1.7% 1.7%
 Previous -- 257 329 -- -- -- --
 Manufacturing 8 21 19 1.7 1.4 0.8 1.7
 Construction 29 49 44 5.3 4.8 3.7 2.1
 Private Service Producing 259 173 255 2.7 2.2 2.2 2.2
 Government 7 2 10 0.4 0.0 -0.3 -0.8
Average Weekly Hours - Private Sector 34.6 34.6 34.6 34.4
(Feb.'14)
34.5 34.5 34.4
Private Sector Average Hourly Earnings (%) 0.1 0.5 -0.2 2.0 2.1 2.1 1.9
Unemployment Rate (%) 5.5 5.7 5.6 6.7
(Feb.'14)
6.1 7.4 8.1
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