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Economy in Brief

U.S. Nonfarm Payrolls Show Unexpected Strength Ahead of Coronavirus Outbreak; Wages Improve & Unemployment Dips
by Tom Moeller  March 6, 2020

The job market firmed in February. Nonfarm payroll employment increased 273,000 (1.6% y/y), repeating January's increase which was revised from 225,000. The December increase also was upwardly revised to 184,000 from 147,000. A 170,000 increase had been expected in the Action Economics Forecast Survey.

Average hourly earnings in the private sector rose an expected 0.3% following an unrevised 0.2% January improvement. Growth of 3.0% y/y remained below its 12-month peak of 3.5%.

The unemployment rate declined to 3.5% in February. Stability at 3.6% had been expected. Employment in the household survey rose 45,000, but the labor force declined 60,000. The overall jobless rate, including those who were marginally attached or working part-time for economic reasons, increased to 7.0%, its highest level in six months.

From the payroll survey of employment, the 273,000 increase in jobs reflected a 42,000 increase in construction which followed a 49,000 gain. These increases were by far the largest since early last year. Factory sector employment increased 15,000 following declines in three of the prior four months. Mining & logging sector jobs improved 4,000 (-4.0% y/y), the first increase since October.

The number of private service jobs rose 167,000 led by a 54,000 rise (2.7% y/y) in education & health services which came after a 72,000 jump. Leisure & hospitality employment gained 51,000 (2.6% y/y) which was the largest rise since October. The number of professional & business services jobs increased 41,000 (2.0% y/y) which also was the largest rise in four months. Temporary help positions declined 3,300 (-1.0% y/y). A 26,000 gain (1.9% y/y) in financial sector employment was by far the largest increase in two years. Trade, transportation & utilities employment declined 13,000 (+0.4% y/y) as the number of retail jobs fell 7,000 (-0.2% y/y).

In the public sector, jobs increased 45,000 (1.0% y/y) after a 51,000 January gain. Together, these were the largest increases in ten years. The latest increase was led by a 19,000 surge (1.0% y/y) in local employment. State government employment also was strong, rising an increased 18,000 (0.7% y/y). Federal government jobs improved a strengthened 8,000 (1.6% y/y).

The improved 0.3% rise (3.0% y/y) in average hourly earnings was led by a 0.7% strengthening (3.9% y/y) in financial services pay. Professional & business services earnings gained 0.4% (3.7% y/y) and leisure & hospitality earnings rose a steady 0.3% (3.0% y/y). Construction earnings increased 0.4% (3.0% y/y), the largest increase in three months. Mining & logging sector pay rose 0.5% and a strengthened 4.8% y/y, while factory sector earnings inched 0.1% higher (2.8% y/y).

The length of the average workweek improved slightly m/m to 34.4 hours but remained below the June 2018 peak of 34.6 hours. The mining & logging sector workweek eased to 45.6 hours, but the factory sector workweek lengthened to 40.7 hours. The construction sector workweek increased slightly to 39.3 hours. In the private service sector, the number of hours-worked rose to 33.3. That reflected an easing in financial activities to 37.6 hours, but professional & business services rose to 36.2 hours. The length of the workweek in education & health services rose to the May 2008 record of 33.1 hours. Leisure & hospitality hours eased to 25.8, matching the fewest since 2013.

From the household employment survey, the decline in the unemployment rate to 3.5% returned it to the 50-year low. The decline in the labor force reflected a steady labor force participation rate of 63.4%. That remained increased from the September 2015 low of 62.4%. The teenage participation rate returned to a 12-year high of 36.4%, and for those aged 20-24, it held steady at an increased 72.9%. For workers aged 25-54, the rate eased from the 2008 average high of 83.1% to 83.0%. For men in that age bracket, the rate held steady at 89.3%. For women of that age, it held at 77.0%, the highest rate since 2000 and up from an average 73.7% during all of 2015. For workers aged 55 & over, the participation rate remained at an elevated 40.3%, and was increased from 29.4% in 1993. The employment/population ratio eased m/m to 61.1%, but remained up from 58.4% in 2011.

The average duration of unemployment slipped to 20.9 weeks, roughly half what it was at its high in 2011.

The teenage unemployment rate fell sharply to 11.0%, well below the 25.9% averaged in 2010. The rate for workers aged 20-24 of 6.4% was less than half the 15.5% average in 2010. For workers aged 25-54, the steady rate of 3.0% was down from 8.6% in 2010. For those over 55, the jobless rate of 2.6% compared to 7.0% in 2010.

By educational attainment, unemployment of workers without a high school diploma rose to 5.7%, its highest level in roughly one year. High school graduates without a college degree were a lessened 3.6% unemployed and those with some college but no degree were a slightly higher 3.0% without work. College graduates were 1.9% unemployed, equaling the least since 2007.

The labor market data are contained in Haver's USECON database. Detailed figures are in the EMPL and LABOR databases. The expectations figures are in the AS1REPNA database.

Employment: (SA, M/M Change, 000s) Feb Jan Dec Feb Y/Y 2019 2018 2017
Payroll Employment 273 273 184 1.6% 1.4% 1.6% 1.6%
 Previous Estimate -- 225 147 -- -- -- --
  Manufacturing 15 -20 -2 0.2 1.2 2.0 0.7
  Construction 42 49 16 2.9 2.8 4.6 3.6
  Private Service-Producing 167 195 159 1.8 1.4 1.5 1.8
  Government 45 51 20 1.0 0.6 0.5 0.4
Average Weekly Hours - Private Sector 34.4 34.3 34.3 34.4 34.4 34.5 34.4
Private Sector Average Hourly Earnings (%) 0.3 0.2 0.1 3.0 3.3 3.0 2.6
Unemployment Rate (%) 3.5 3.6 3.5 3.8 3.7 3.9 4.3
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