A Mixed Bag Jobs Report

Employers add 275k jobs in February

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U.S. employers added 275,000 jobs in February, about 75,000 more than expected. Unfortunately, this is not as encouraging as it seems at first glance; estimated job growth in December and January was revised down by a collective 167,000 jobs.

Even with those downward revisions, growth has accelerated a bit since December (assuming we don’t see a major downward revision to the February data). Employers added an average of 265,000 jobs over the past three months, the most since June 2023.

The unemployment rate ticked up to 3.9%. That’s the highest rate since January 2022 but still extraordinarily low—from 2001 to 2017, the unemployment rate never slipped below 4%. Looking at it by age, the increase was entirely due to rising unemployment for workers aged 34 and under. There was an especially large increase in the unemployment rate for workers 24 and under. The unemployment rate actually declined for workers 35 and older.

Wage growth was a little tricky this month. Average hourly earnings inched up just 0.1% for the month, the slowest increase in exactly two years, but that follows a massive (and weather-induced) 0.5% increase in January.

Over the past two months, average hourly earnings are up about 0.7%. That’s almost the exact same rate observed across 2023, so wages are still rising pretty quickly.

By Sector

Education and health services—which includes private education but not public schools—added more jobs than any other sector for a 12^th consecutive month. Leisure and hospitality also added jobs at a pretty rapid clip, largely due to 41,600 new jobs at restaurants.

Manufacturing lost jobs—not too surprising given what we know about the goods producing sector—with the weakness spread pretty evenly across the manufacturing subsectors. So did mining and logging, which includes extraction operations (think oil).

Information (think news and tech), which has had the most visible layoffs over the past couple years, added just 2,000 jobs in February. Employment in that category has declined by 29,000 over the past year, with the majority of job losses in the publishing category. The fact that the industry that gives us our news is in its own recession might have something to do with the poor consumer sentiment.

Temporary help services (think staffing firms) lost another 15,400 jobs for the month, and employment in that category has fallen by 207,000 over the past year. Some consider this a harbinger of weakness to come, though it may be that staffing firms have lost some of their utility given labor shortages and online job listing websites.

What do we take from this?

It appears that the economy is slowing. It’s way too soon to talk about imminent recession, though I continue to believe that the onset of one is possible very late this year. While the establishment survey indicated job growth, the household survey indicated job loss in February.

My principal concerns revolve around record levels of high interest credit card debt, uncertainty triggered by geopolitics and federal elections, and the notion that interest rates are poised to stay higher for longer. Federal Reserve Chairman Jerome Powell continues to indicate that monetary policymakers aren’t quite ready to start cutting rates. Even if they start cutting this year (a growing number of economists have concluded that there will be NO rate cuts this year), interest rates will still be restrictive to growth as we enter 2025.

What’s next?

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