Solid Hiring is the Antidote to Fiscal Tightening
- The February Payroll Employment Survey showed a solid gain of 236,000 jobs, beating expectations.
- The Unemployment Rate for February decreased to 7.7 percent, the lowest since December 2008.
- Average Weekly Hours ticked up for the month to 34.5. Hourly earnings were up 0.2 percent.
Labor market data for February was better than expected. The official Bureau of Labor Statistics report showed a solid gain of 236,000 payroll jobs for the month. Construction added 48,000 reflecting increased activity in both residential and nonresidential sectors. Manufacturing added 14,000 jobs across a variety of industries. Retail trade gained 24,000 jobs in February. Financial services gained 7,000 jobs, primarily in real estate related activities. Professional and business services added a strong 73,000 jobs as temporary worker employment increased by 16,000. Temp workers are the canary in the labor coal mine, and in February the canary was singing. Education and healthcare gained 24,000. Leisure and hospitality was up 24,000. The government sector was still a drain, subtracting 10,000 jobs from the total as state and local government employment fell. One month does not make a recovery, but the magnitude and distribution of job gains in February looks very healthy. Other good news….the average workweek increased a tenth to 34.5 hours, and average hourly earnings increased by 0.2 percent. Not only were more workers hired but they also worked longer hours and got paid more; good news for production and for income. The unemployment rate fell from 7.9 percent to 7.7 percent which is the lowest it has been since December 2008. The unemployment rate derives from the household survey which is completely separate from the payroll survey. The household survey showed a smaller gain of 170,000 jobs in February. It also showed that the labor force declined by 130,000, which helped to lower the unemployment rate.
The solid labor report for February is consistent with other data points that show that the economy is maintaining its momentum even as fiscal tightening increases. Auto sales ticked up to a 15.4 million unit pace in February, breaking the declining trend since the November post-Sandy surge. Housing indicators all continue to point north, with ample upside potential remaining. Oil prices have fallen since mid-February. U.S. stock indexes have crested pre-recession highs. If we can keep the labor market momentum up for the next few critical months, as fiscal tightening continues, many other good things will happen. Solid hiring is the antidote to fiscal tightening. We got a dose of the antidote in February. More is needed.
Market Reaction: U.S. equity markets opened with gains. Treasury bond yields are up. NYMEX crude is down to $91.36/barrel. The dollar is up versus the yen and the euro.
Click here for a PDF version of the Comerica Economic Alert: Employment 030813.