Little Wage Inflation But February Jobs Jump 313,000

Economists expected significant wage growth in the jobs report. Nope. The surprise was in the strength of jobs.

Initial Reaction

  • Today’s establishment survey shows jobs rose by 313,000 topping the consensus estimate of 205,000 and even the top estimate of 230,000 by a wide margin.
  • The household survey (Table A) shows the baseline unemployment rate was steady at 4.1% for the fifth consecutive month.
  • U-6 unemployment, which counts involuntary part-time jobs was steady at 8.2%.
  • The average workweek rose by 0.1 hours. Year-over-year the workweek is up 0.1 hours. so ignore any mainstream comments about strength of the workweek.
  • Those expecting wages to jump based on Phillips Curve nonsense were disappointed again. Average hourly earnings rose 0.15%. Year-over-year wages are up 2.6%.
  • The labor force rose by 806,000. More people are looking for jobs.

Let’s dive into the details in the BLS Employment Situation Summary, unofficially called the Jobs Report.

BLS Jobs Statistics at a Glance

  • Nonfarm Payroll: +313,000 – Establishment Survey
  • Employment: +785,000 – Household Survey
  • Unemployment: +22,000 – Household Survey
  • Involuntary Part-Time Work: +171,000 – Household Survey
  • Voluntary Part-Time Work: +194,000 – Household Survey
  • Baseline Unemployment Rate: flat at 4.1% – Household Survey
  • U-6 unemployment: +0.0 to 8.2% – Household Survey
  • Civilian Noninstitutional Population: +154,000
  • Civilian Labor Force: +806,000 – Household Survey
  • Not in Labor Force: -653,000 – Household Survey
  • Participation Rate: +0.3 to 63.0 – Household Survey

Employment Report Statement

Total nonfarm payroll employment increased by 313,000 in February, and the unemployment rate was unchanged at 4.1 percent, the U.S. Bureau of Labor Statistics reported today. Employment rose in construction, retail trade, professional and business services, manufacturing, financial activities, and mining.

Revisions

The change in total nonfarm payroll employment for December was revised up from +160,000 to +175,000, and the change for January was revised up from +200,000 to +239,000. With these revisions, employment gains in December and January combined were 54,000 more than previously reported.

Unemployment Rate – Seasonally Adjusted

The above Unemployment Rate Chart is from the BLS. Click on the link for an interactive chart.

Nonfarm Job Change from Previous Month

The above chart and the following chart from the BLS show establishment survey jobs, not household survey employment.

Nonfarm Jobs Change from Previous Month by Job Type

Hours and Wages

The Average Weekly Hours of all private employees rose by 0.1 hours to 34.5 hours. The average weekly hours of all private service-providing employees rose by 0.1 hours to 33.3 hours. Average weekly hours of manufacturers was rose by 0.2 hour to 40.8 hours.

The Average Hourly Earnings of private workers rose $0.06 to $22.40. Average hourly earnings of private service-providing employees rose $0.04 to to $22.12. Average hourly earnings of manufacturers rose $0.06 at $21.34.

Month-Over-Month Wages

Year-Over-Year Wages

Birth Death Model

Starting January 2014, I dropped the Birth/Death Model charts from this report. For those who follow the numbers, I retain this caution: Do not subtract the reported Birth-Death number from the reported headline number. That approach is statistically invalid. Should anything interesting arise in the Birth/Death numbers, I will comment further.

Table 15 BLS Alternate Measures of Unemployment

Table A-15 is where one can find a better approximation of what the unemployment rate really is.

Notice I said “better” approximation not to be confused with “good” approximation.

The official unemployment rate is 4.1%. However, if you start counting all the people who want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is in the last row labeled U-6.

U-6 is much higher at 8.2%. Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years.

Some of those dropping out of the labor force retired because they wanted to retire. The rest is disability fraud, forced retirement, discouraged workers, and kids moving back home because they cannot find a job.

Strength is Relative

It’s important to put the jobs numbers into proper perspective.

  1. In the household survey, if you work as little as 1 hour a week, even selling trinkets on eBay, you are considered employed.
  2. In the household survey, if you work three part-time jobs, 12 hours each, the BLS considers you a full-time employee.
  3. In the payroll survey, three part-time jobs count as three jobs. The BLS attempts to factor this in, but they do not weed out duplicate Social Security numbers. The potential for double-counting jobs in the payroll survey is large.

Household Survey vs. Payroll Survey

The payroll survey (sometimes called the establishment survey) is the headline jobs number, generally released the first Friday of every month. It is based on employer reporting.

The household survey is a phone survey conducted by the BLS. It measures unemployment and many other factors.

If you work one hour, you are employed. If you don’t have a job and fail to look for one, you are not considered unemployed, rather, you drop out of the labor force.

Looking for jobs on Monster does not count as “looking for a job”. You need an actual interview or send out a resume.

These distortions artificially lower the unemployment rate, artificially boost full-time employment, and artificially increase the payroll jobs report every month.

Final Thoughts

Year-over-year wages are only up 2.6%, on average.

The median worker is doing much worse but that data will not be available for over a year.

The latest median wage data is from May of 2016. It shows real median wages decline in seven out of the last 11 years.

Weak wage growth has not kept up with inflation, despite the BLS purporting otherwise.

Mike “Mish” Shedlock

Comments (17)
No. 1-17
El_Tedo
El_Tedo

It's more good news. It's time for the perma-bears to questions some of their presumptions.

bradw2k
bradw2k

Anyone with eyes can guess that unemployment is bottoming right about here.

Realist
Realist

The bears will say that the stats are bogus; that the average American worker is unemployed, miserable and angry. Housing is going to crash. The economy is about to tank. The system is about to fall apart. We need Trump to get us back the jobs that were automated 30 years ago. - It’s sad actually that people can’t see the slow and steady growth that has been happening for the last 10 years. I keep saying the slow growth should continue for the foreseeable future, provided Trump doesn’t start a trade war.

theplanningmotive
theplanningmotive

As always confusing figures such as many more jobs in retail but not in transport warehousing where the growth in sales is highest. I despair at the quality of statistics coming out of the US recently.

Realist
Realist

Don’t despair over the quality of the monthly stats. Focus on the long term trends. Look at the steady decline in unemployment in the graph, from 10% in 2010 to 4% today. Seems like slow and steady progress to me. Yet throughout the entire time period people have been warning about the collapse that is right around the corner.

TCW
TCW

So how high can public and private debt go before it all comes crashing down?

nic9075
nic9075

I know the NYC area and in greater Boston have the best job markets in the country. Stores are going out of business because owners can't find workers even offering $25 an hour now at McDonald's

Realist
Realist

TCW; “So how high can public and private debt go before it all comes crashing down?” It is obvious that no one knows the answer to that question. I have seen people predicting the end of the financial systems for the last 5 decades. Sure, there were bumps along the way, yet here we are, still growing. I’m not saying that it can’t happen, but if you keep believing “the end is near” it will probably be to your detriment.

Realist
Realist

Hi nic. That is interesting, because the pessimists on this site will tell you that the average US worker is unemployed and and the unemployment stats are all bogus.

nic9075
nic9075

Those who can't get jobs now are those who are truely unemployable because they can't pass a background check, or have been out of the workforce for some time (even mothers figured out that doing the Stay at home mommy thing is a huge cost in terms of future income and having to explain the reasoning to paranoid hiring managers at interviews)

Realist
Realist

There is always a percentage of workers who can be upgraded, educated, and taught relevant skills in order to get a better job. (I work with a charity in my country that does exactly that. It’s partly why I mentioned skills so often in my posts.) Every country needs to improve the skills of its workers in order to give them a better chance to get a good job.

Realist
Realist

And every worker needs to be proactive in improving themselves to have a better chance in today’s job market.

Realist
Realist

Thank you Mish. I find it very rewarding. One of the ways I like to “give back”. We don’t have to have the wealth of Bill Gates or Warren Buffet to help others . We can all make a difference.

Ambrose_Bierce
Ambrose_Bierce

So a hot jobs report means the economy is overheating, and more pressure on the Fed, yet the markets took it as a vote of confidence. If the stock market had gone down overheating would have been the concern.

Pater_Tenebrarum
Pater_Tenebrarum

It is important to adopt a nuanced view - as long as there is a market economy, even a severely hampered one - it will create net wealth over time. This is after all the historical experience with capitalism. The problem with the economic distortions and boom-bust cycles introduced by centrally planned monetary policy and the amassing of huge government debt (both of which gradually weaken the economy's capital structure) is that we end up with a state of affairs that is a lot less satisfactory than it would have been otherwise. It is no coincidence that the by far biggest real economic growth per capita happened in the decades before the Fed and the modern welfare/warfare state were established. And it is no coincidence that an accelerated decline in average real economic growth has taken hold decade after decade ever since a pure fiat money system with the associated unfettered money supply and credit growth was adopted. This state of affairs is particularly concerning when considering the many tailwinds the economy has experienced at the same time: the collapse of communism, the vast surge in global trade, the technological revolution triggered by the commercialization of computers and all the related systems and devices this has spawned (including the internet over which we are now communicating). Why has economic growth slowed? Shouldn't it have accelerated under such circumstances?

Realist
Realist

Hi Pater. I agree with you. However, since I have little personal control over the powers that be, all I can do is adapt as best I can.