The Corner

Notes on Today’s Jobs Report

Despite atrocious winter weather in February, nonfarm payrolls posted a solid and above-consensus gain of 175,000. Private-sector payrolls were up 162,000. Not all of the report was as good as the top-line payroll numbers, but we think the weather is the main reason, and so expect better reports in the months ahead.

The unemployment rate ticked up to 6.7 percent from 6.6 percent in January. The increase in the jobless rate was the result of a 264,000 increase in the labor force (good!) alongside only a 42,000 gain in civilian employment, an alternative measure of jobs that includes small-business start-ups. However, the same survey said 601,000 people missed work due to bad weather, compared to an average of 357,000 over the previous ten Februarys. In other words, if weather had been typical in February, civilian employment would have been up about 250,000 to 300,000 and the jobless rate would have stayed at 6.6 percent, very close to the Federal Reserve’s 6.5 percent threshold for starting to discuss rate hikes. As a result, look for the Fed to change that threshold at its meeting on March 19, but keep tapering firmly on track.

The best detail from today’s report was the 0.4 percent increase in average hourly earnings, the largest in eight months. As a result, despite the weather helping push down hours worked by 0.2 percent, total cash earnings for all workers combined were up 0.2 percent, which means more increases in consumer spending.

Part-time employment fell 209,000 in February, is down 703,000 in the past year, and is now the smallest share of employment since October 2008. Hopefully this will silence the pessimists who were contorting that data series in 2013 to spin a negative story. And while the headline unemployment rate ticked down slightly, the U-6 unemployment rate dropped to 12.6 percent from 12.7 percent.

As we always remind our readers, the labor market could and would be doing better with a better set of public policies. But it is still improving. In the past year nonfarm payrolls have grown at an average monthly rate of 180,000 while civilian employment is up 150,000 per month. We expect a continued re-acceleration in the months ahead. The plowhorse economy is still moving forward.

(An aside: As a financial-sector economist, my job is to look at each employment report in terms of the direction of the economy. If you’re looking for someone who uses each report as a pretext to bemoan the general state of the labor market — which they could just as easily criticize on any other day of the month — please feel free to look elsewhere. In the past two years my firm, First Trust Advisors, has been ranked No. 1 by Bloomberg for forecasting private-sector payrolls and No. 2 for forecasting nonfarm payrolls, and that’s among about 100 forecasting groups, so I’d put our track record for accuracy and analysis against anyone’s.)

— Robert Stein is deputy chief economist at First Trust Advisors, LP.

Robert Stein is an economist for an asset-management firm and a former deputy assistant Treasury secretary for macroeconomic analysis.


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