February 2015 Employment Situation Summary (030615): 295K SA Payroll Jobs Added, Unemployment Rate Drops to 5.5%; Malaise Factors Continue Unchecked; Seasonal Adjustments Overhype Real Results

Predictions:

• Yahoo’s Economic Calendar — +240K payroll jobs added, with a drop in the unemployment rate to 5.6%.
• Bloomberg — +240K, 5.6%.
• Business Insider — +240K, 5.6%.

Update: The contrarians at Zero Hedge expect a number “well below 200,000″ — “unless some 100,000 bartenders were hired in the deep of winter.”

Not seasonally adjusted benchmarks:

I’ll have to put up the tables later, but they show that February is a month of major net job additions.

Accordingly, based on a look at historical results:

• The economy needs to have added 1.075 million nonfarm payroll jobs to be marching along acceptably. For comparison’s sake, that’s a bit more than the 1.038 million added in February 2013.
• The economy needs to have added 575,000 private-sector payroll jobs. That’s somewhat more than the 553,000 added in February 2013.

The report will be here at 8:30.

HERE IT IS (permanent full HTML link): A strong report, pending a look at the raw figures (Update: See the rest of this post; it’s not nearly as strong as the seasonal figures would lead one to believe) —

Total nonfarm payroll employment increased by 295,000 in February, and the unemployment rate edged down to 5.5 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in food services and drinking places, professional and business services, construction, health care, and in transportation and warehousing. Employment in mining was down over the month.

Household Survey Data

Both the unemployment rate (5.5 percent) and the number of unemployed persons (8.7 million) edged down in February. Over the year, the unemployment rate and the number of unemployed persons were down by 1.2 percentage points and 1.7 million, respectively.

Among the major worker groups, the unemployment rate for teenagers decreased by 1.7 percentage points to 17.1 percent in February. The jobless rates for adult men (5.2 percent), adult women (4.9 percent), whites (4.7 percent), blacks (10.4 percent), Asians (4.0 percent), and Hispanics (6.6 percent) showed little or no change.

The number of long-term unemployed (those jobless for 27 weeks or more) was little changed at 2.7 million in February. These individuals accounted for 31.1 percent of the unemployed. Over the past 12 months, the number of long-term unemployed is down by 1.1 million.

The civilian labor force participation rate, at 62.8 percent, changed little in February and has remained within a narrow range of 62.7 to 62.9 percent since April 2014. The employment-population ratio was unchanged at 59.3 percent in February but is up by 0.5 percentage point over the year.

… Establishment Survey Data

Total nonfarm payroll employment rose by 295,000 in February, compared with an average monthly gain of 266,000 over the prior 12 months. Job gains occurred in food services and drinking places, professional and business services, construction, health care, and in transportation and warehousing. Employment in mining declined over the month.

In February, food services and drinking places added 59,000 jobs. The industry had added an average of 35,000 jobs per month over the prior 12 months.

Employment in professional and business services increased by 51,000 in February and has risen by 660,000 over the year. In February, employment continued to trend up in management and technical consulting services (+7,000), computer systems design and related services (+5,000), and architectural and engineering services (+5,000).

… After revision, the change in total nonfarm payroll employment for December remained at +329,000, and the change for January was revised from +257,000 to +239,000. With these revisions, employment gains in December and January were 18,000 lower than previously reported. Over the past 3 months, job gains have averaged 288,000 per month.

Immediate observations (seasonally adjusted unless otherwise indicated):

• The seasonally adjusted labor force shrunk by 178,000 (…!), and the jobs pickup in the Household Survey was only 96,000 (after a 759,000 increase in January). Over the past four months, the Establishment Survey of payroll jobs has added about a quarter-million more jobs than the Household Survey (Update: Specifically, 1.286 million vs. 1.037 milllion).
• “Not in labor force” is back to its previous record of 92.9 mllion.
• Full-time employment increased by 123,000, while part-time employment dropped by 75,000.
• In raw numbers, the 100,000 “bartenders” Zero Hedge alluded to almost materialized. “Food service and drinking places” employment increased by 97,600, which was seasonally adjusted to 58,700.

Not seasonally adjusted benchmarks (link):

• Total nonfarm — 903K actual vs. 1.075 million needed.
• Private sector — 467K actual vs. 575K needed. (Also note that 12.6% 21% of those jobs — 97,600 divided by 467,000 — were in ”Food service and drinking places,” a segment which is only about 8% of the workforce.)

Both shortfalls are significant. Pending a further look, it appears that the seasonal adjustments yielded a result more favorable than justified by the raw numbers.

UPDATE: Oh yeah, the seasonally adjusted figures are higher than justified —

The Feb. 2015 raw NFP figure is 135K below 2013 and 51K below 2012, but this year’s seasonally adjusted figure of 295K is only 19K lower and 48K higher, respectively. I’d say today’s number makes things look at least 75,000 jobs better than justified.

Readers comparing this year to 2014 may point out that this year’s seasonally adjusted figure went up by less than the raw increase. The answer there is that the February 2014 seasonally adjusted figure was miles higher than the horrid 741K in raw job additions justified.

The result is similar on the private-sector side. The Feb. 2015 raw figure is 86K below 2013 and 26K below 2012, but this year’s seasonally adjusted figure of 288K is only 9K lower and 39K higher, respectively. I’d say today’s number makes the situation in the private sector look at least 60,000 jobs better than justified.

Overall: So despite what appears to be a pretty strong month after seasonalizing, February was really a bit weaker than January, though not alarmingly so. February and the the next four months are supposed to be big ones for raw job additions. February’s start to the festivities, while not awful, was certainly not wildly encouraging.