Weather Slows Job Growth in February, Unemployment Stays Flat at 4.9 Percent

The Labor Department reported a sharp increase in the number of people entering the labor force in February and finding jobs, pushing the employment-to-population ratio (EPOP) to 59.8 percent, the highest rate in the recovery. The establishment survey showed the economy creating 242,000 new jobs. Apparently the snowstorms that hit the East Coast in early February did not markedly affect employment growth. Upward revisions to the prior two months data brought average growth over the last three months to 228,000.

The big job gainers were retail, which added 54,900 jobs, restaurants with a gain of 40,200 jobs, and health care with a rise of 38,100 jobs. The first two numbers are considerably faster than average gains over the last year, while the gains in the healthcare sector are almost exactly in line with previous growth. Construction added 19,000 jobs in February. The relatively high-paying professional and technical services sector added 17,600 jobs. Educational services added 28,200 jobs in February, but most of this gain reversed a sharp fall reported for January.

Interestingly, the temp sector shed jobs for the second consecutive month. Employment in the sector had been essentially flat since October. Manufacturing lost 16,000 jobs, reversing most of the gain reported for January. After showing modest growth from 2010 to 2014, manufacturing employment has been virtually flat since the start of 2015 due to the rising trade deficit.

In contrast to the strong growth in employment, the average workweek reportedly fell by 0.2 hours in February, leading to a decline in the index of aggregate weekly hours. Weather may have been a factor in this decline as some businesses were likely closed for a day or two during the reference period.

The average hourly wage also reportedly fell by 3 cents in February. The reported decline is most likely a reporting error, but still the average hourly wage has only increased at a 2.0 percent annual rate comparing the last three months to the prior three months. There is certainly no case of accelerating wage growth in these data.

The recent rise in the EPOP suggests that many of the people who had left the labor force during the downturn are now coming back, although the EPOP is still down by more than three full percentage points from the pre-recession level. Most of the drop-off is among prime age workers who still have an EPOP that is 2.5 percentage points below its pre-recession peak.

Other news in the household survey was mixed. The percentage of unemployment attributable to voluntary job leavers edged down to 9.7 percent, a level that is more consistent with a recession than a robust labor market. Also, all the duration measures edged up in February. The measures of duration and share of long-term unemployed are also not consistent with a strong labor market.

There was no change in the number of people involuntarily working part-time in February. It is down by more than 3 million from the peak in 2010, with most of the drop coming since the end of 2013 when the health care exchanges came on line. By contrast, voluntary part-time employment has risen by almost 1.8 million (10.0 percent) since the ACA exchanges began to operate. There also has been a substantial rise in the number of incorporated self-employed, with a gain of more than 400,000 (7.6 percent) over the last two years.

Contrary to many predictions, college-educated workers have not been faring especially well in this recovery. The employment rate for workers with college degrees is actually down by 0.3 percentage points from its year-ago level. While the unemployment rate has fallen by 0.2 percentage points over the last year, it is still well above its pre-recession level. By contrast, workers without high school degrees had a 0.5 percentage point rise in EPOPs and workers with some college had a 0.6 percentage point rise in EPOPs over the last year.

Overall, this report indicates that the economy is still adding jobs at a healthy pace in spite of other evidence of a slowdown. Nonetheless, the weak job growth, low quit rates and long duration measures suggest the labor market is far from having fully recovered.