February 2017 Employment Situation Summary (031017): +235K Jobs Added, Unemployment Rate Dips to 4.7 Pct.; Underlying Jobs Results Far Stronger Seasonal Adjustments Show, by AT LEAST 150K Overall and 120K in the Private Sector
TOPLINE: Today’s raw results for payroll job additions are stellar, reflecting an underlying strength that is far greater than the +235K seasonally adjusted overall result (by at least 150,000 jobs), and far greater than the +227K private-sector result (by at least 120,000 jobs). Given that January’s seasonally payroll jobs results significantly OVERSTATED underlying strength, it is not unreasonable to ask, given the change in administrations and particularly the change in leadership at the Bureau of Labor Statistics, if January’s overstatements were concocted for the express purpose of forcing February’s results to be understated. Scroll down for details.
I haven’t had time to say much about the economy in the past couple of weeks, so let’s look at the key reports since the Feb. 28 GDP release, which told us that fourth-quarter growth was a very tepid annualized 1.9 percent.
March 1 — the February Institute for Supply Management’s Manufacturing Index came in at 57.7 percent, a 1.7-point increase from January. That is definitely the highest value in the six months since the index was last in contraction (i.e., below 50 percent), and according to the Associated Press is the highest value since October 2014. New Orders and Production each had values in the 60s, while Backlog of Orders, which has been a long-term laggard, shot up to 57.0 percent from 49.5 percent. This would appear to indicate that manufacturers have a longer-term stack of orders to fill, and that they may be in a better position to engage in longer-term planning. 17 of 18 industries were in expansion, the highest such figure I’ve seen in a very long time.
March 1 — February Vehicle Sales came in 1.1 parent below February of last year. Year-to-date sales are down 1.4 percent. GM was up 4.1 percent year-over-year in February, while Ford, Chrysler and Toyota saw declines, while Honda and Nissan had modest increases. The bigger-picture news is that car sales are tanking (down 12.1 percent YTD), while truck (i.e., SUVs and the like) are up 6.4 percent. The unit sales decline is probably not a big deal, because the overall revenue from this mix is almost certainly higher.
March 3 — February’s ISM Non Manufacturing Index also came in strong at 57.6 percent, up from 56.5 percent in January. AP reported that it’s the highest result since October 2015. Business Activity and Production both came in with values in the 60s which were up from the previous month, and Backlog of Orders also came in nicely positive (54.0 percent) for a change. 16 of 18 industries were in expansion.
- March 1 — January Construction spending was down 1.0 percent, a huge miss from predictions of +0.8 percent. December was revised up a bit, but that doesn’t change the narrative that this metric has hit a rough patch.
- March 8 — January wholesale trade info shows that inventories were down 0.2 percent but year-over-year sales are up nicely, and the Inventory to sales ratio is finally moderating to a below-danger level. This probably hurts 1Q GDP, but is an indicator of longer-term health.
- March 6 — Factory Orders have had a two-month run of increases of more than 1 percent (Dec., +1.3 percent; Jan., +1.2 percent), which is a welcome change from what we’ve generally seen during the past couple of years.
- March 7 — The trade balance situation in February deteriorated to -$48.5 billion, almost 10 percent higher than January.
- March 8 — Fourth quarter 2016 productivity only increase at an annualized 1.3 percent. This stat has been in a two-year funk.
- March 8 — ADP’s Employment Report showed 298,000 private-sector jobs added, following an upwardly revised January figure of 261K.
Predictions: Yahoo’s Economic Calendar has estimates from 188K to 225K jobs added, and an unemployment rate of 4.7 percent.
Hugely important: What will the raw data tell us? February is typically a huge month for actual hiring (before seasonal adjustment). A really strong month would be 1.1 million overall additional hires and perhaps 600,000 of them in the private sector. I’ll post the related BLS tables after the report’s release.
I also should note that last month’s seasonal adjustments to +227K overall and +237K for the private sector overstated the underlying strength of the results significantly (75K-150K overall) and 45K-100K in the private sector.
Finally, this report is the first to be released free of influence from former BLS Director Erica Groshen, a hard-leftist whom the Senate GOP should never have confirmed into her position in 2013. She departed on January 27, but presumably exercised oversight over the January jobs report issued on February 3 (based on payroll data from the week of January 12). Groshen’s regime was marked by what I found to be a significant change in tone and focus in the monthly employment report which tended to overdo the alleged positives and ignore the less-positives, like the steep rise in temporary employment.
Groshen’s regime was also a period during which the unemployment rate fell sharply, at a pace which data-gatherers in the Census Bureau found hard to believe, indicating that there may have been changes in the way membership in the labor force was determined, excluding far more people than should have been excluded.
HERE IT IS —
Total nonfarm payroll employment increased by 235,000 in February, and the unemployment rate was little changed at 4.7 percent, the U.S. Bureau of Labor Statistics reported today. Employment gains occurred in construction, private educational services, manufacturing, health care, and mining.
Household Survey Data
The number of unemployed persons, at 7.5 million, changed little in February. The unemployment rate, at 4.7 percent, was little changed over the month but was down from 4.9 percent a year earlier.
Among the major worker groups, the unemployment rate decreased for Whites to 4.1 percent in February, while the jobless rates for adult men (4.3 percent), adult women (4.3 percent), teenagers (15.0 percent), Blacks (8.1 percent), Asians (3.4 percent), and Hispanics (5.6 percent) showed little or no change.
The number of long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged at 1.8 million in February and accounted for 23.8 percent of the unemployed. Over the year, the number of long-term unemployed was down by 358,000.
In February, the labor force participation rate, at 63.0 percent, and the employment-population ratio, at 60.0 percent, showed little change.
… Establishment Survey Data
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.
Health care employment rose by 27,000 in February, with a job gain in ambulatory health care services (+18,000). Over the year, health care has added an average of 30,000 jobs per month.
Employment in mining increased by 8,000 in February, with most of the gain occurring in support activities for mining (+6,000). Mining employment has risen by 20,000 since reaching a recent low in October 2016.
Employment in professional and business services continued to trend up in February (+37,000). The industry has added 597,000 jobs over the year.
Retail trade employment edged down in February (-26,000), following a gain of 40,000 in the prior month. Over the month, job losses occurred in general merchandise stores
(-19,000); sporting goods, hobby, book, and music stores (-9,000); and electronics
and appliance stores (-8,000).
Employment in other major industries, including wholesale trade, transportation and warehousing, information, financial activities, leisure and hospitality, and government, showed little or no change over the month.
The average workweek for all employees on private nonfarm payrolls was unchanged at 34.4 hours in February. In manufacturing, the workweek was unchanged at 40.8 hours, and overtime remained at 3.3 hours. The average workweek for production and
nonsupervisory employees on private nonfarm payrolls has been 33.6 hours since August
In February, average hourly earnings for all employees on private nonfarm payrolls increased by 6 cents to $26.09, following a 5-cent increase in January. Over the year, average hourly earnings have risen by 71 cents, or 2.8 percent. In February, average hourly earnings of private-sector production and nonsupervisory employees increased by 4 cents to $21.86 in February.
The change in total nonfarm payroll employment for December was revised down from +157,000 to +155,000, and the change for January was revised up from +227,000 to +238,000. With these revisions, employment gains in December and January combined were 9,000 more than previously reported. Monthly revisions result from additional reports received from businesses since the last published estimates and from the recalculation of seasonal factors. Over the past 3 months, job gains have averaged 209,000 per month.
The guess here is that the seasonally adjusted jobs results have been suppressed by an amount that roughly offsets last month’s overstatement. We’ll see shortly when the detailed tables become accessible. Looking at the tables already present in the BLS statement, 1.01 million jobs were actually added, and 552K in the private sector. That isn’t up to the level of the benchmarks, but they are solid results compared to other post-recession years.
NOT SEASONALLY ADJUSTED RESULTS, and THE BOGUS SEASONAL FIGURES
Yeah, that’s exactly what happened. February’s results are even MORE understated than January was overstated. February’s understatements are so obvious that the even the establishment press will understand them (but they almost certainly won’t report them):
February’s raw total nonfarm additions of 1.01 million are almost 180,000 jobs higher than those seen in the previous two Februarys — and today’s seasonally adjusted result is basically the same. I call BS. 2014 is similarly skewed, while comparisons to 2012 and 2013 make today’s result seem far less overstated. But results that far back don’t matter nearly as much as the past three years, so today’s raw result shows an underlying strength that is at least 150,000 jobs higher than the seasonally adjusted result indicates, which would lead to a result of at least +385K.
Similarly, February’s raw private-sector additions of 552,00 million are an average of 155,000 jobs higher than those seen in the previous two Februarys — and today’s seasonally adjusted result is barely higher. Again, this is BS. 2014 is again similarly skewed, while the two years before that aren’t as obviously skewed. Today’s raw results indicate an underlying private-sector strength that is at least 120,000 jobs higher than the seasonally adjusted result indicates, which would lead to a genuine result of at least +347K.
UPDATE: Other notes (references are to seasonally adjusted results unless otherwise indicated):
- Busting the “there are no more workers out there” meme, the labor force went up by 340K, the number of employed per the Household Survey increased by 447K, and the workforce participation rate has increased by 0.4 percent in the past three months. “Not in Labor Force” has dropped by about 900K.
- Black unemployment went up to 8.1 percent from 7.7 percent, but that’s largely because the labor force only increased by 5K (while the total labor force increase by 340K? Really?), and employment dropped by 67K (with overall employment up by 447K? C’mon).
- War on Women Update — Per the Household Survey, 319K more women were working in February.
- Full-time employment increased by 326K, while part-timers increased by 149K.
- The fully-loaded unemployment rate fell to 9.2 percent.
- Construction, mining and manufacturing employment grew by amounts (58K, 9K, and 28K) similar to those seen in Wednesday’s ADP report (66K, 8K, and 32K).
- Job growth in other areas was more modest (but remember that the seasonally adjusted numbers are generally far lower than the raw numbers would indicate).
- The past two months of average weekly earnings have NOT been impressive, increasing by only $2.02, or less than 0.3 percent.
OVERALL: February was a very strong month, much stronger than the headline number of 235K jobs added would indicate. Additionally, though I still need to quantify and display this, I can also say that the Household Survey numbers for January and February, separate from the population adjustments posted to January (which really relate to December) show a remarkable growth in employment and participation not seen in a long, long time.