February 2019 Employment Situation

Friday’s headline employment number was a dud.  According to the Bureau of Labor Statistics (BLS), our nation gained just 20,000 net new jobs in February 2019.   This followed a gangbuster tally in January of 311,000 (upwardly revised by 7,000).  When we wrote about this large uptick to start the year, we did not think some accelerated trend began nor do we believe February’s data represents some new breakdown in the labor market. In short, it’s probably just statistical noise.

Looking back at the average of some number of months is probably a better exercise for this iteration of employment.  During the past twelve months, the economy has added an average of 209,000 net new jobs each month, down from 235,000 in January but still strong.  Monthly data can be volatile, and sometimes it produces outlier data points.  As you can see in the chart above, dipping as low as 20,000 net new jobs is not unheard of in this expansion (it was lower in May 2016 and September 2017).

Also included in the release is arguably the most watched indicator: the unemployment rate.  It fell to 3.8 percent after rising to 4.0 percent at the start of this year.  Unfortunately, it fell because 300,000 people left the labor market.  However, like the new jobs figure, the estimates of the number of people moving in and out of the labor market can vary widely from month to month. 

There was one strong statistic in this report.  Average hourly wages rose $0.11 to $27.66, after gaining $0.02 in January.  Over the past year, average hourly earnings are up 3.4 percent.  In an economy driven by consumption, higher pay is constructive.

Overall this report wasn’t as bad as the headlines suggest.  However, if we get a few more gains as paltry as the February figure, we’ll take notice.  For now, we are comfortable seeing this as a one-off like we did in the most recent retail sales report which was also incongruent with its recent trend (see Atlas’ note here).  If something negative in the labor market is afoot, we should see it in the next few iterations of the employment situation from the BLS.