The steady rise in United States job creation hit a wall in February. According to The Labor Department’s monthly hiring report, an anemic 20,000 new jobs were created.
To put this into context, January payroll gains were revised upwards to 311,000 and we have seen an average monthly gain of 186,000 jobs for the last three months. The current concern is whether this is a temporary setback to record-breaking employment in the U.S. or a foreshadowing of future weakness.
There are valid explanations for the sudden unexpected decline in new job creation. Diane Swonk, chief economist of global accounting firm Grant Thornton asserts, “Manufacturing has been weak, and there was lousy weather across the country . . . That’s still disruptive.” According to Bloomberg Economist Tim Mahedy, “Today’s report looks more like payback from a strong January gain. It will, and should, raise some eyebrows, but we’ll need a couple more months of data before we have a clear picture of where the labor market is headed in 2019.”
Conducting research into the responses to the job report, it seems analysts, economists, pundits and politicians read it like a Rorschach test. The data is manipulated to serve their own purposes. If someone is an anti-Trumper, the news is viewed as doom and gloom and confirmation that the economy will collapse. Bullish investors read the report as a temporary setback after amazing historic gains. Luke Tilley, chief economist at Wilmington Trust, rationally and succinctly emphasizes the importance of the Labor Department’s data, “Jobs growth is the single best indicator of how the economy is doing. It shows both how many people are being added to payrolls. It tells you much people are being paid, and also any job that is added is a sign of strength of a company’s order book and their prospects going forward.”
Here are some key statistics from the February report:
- The unemployment rate fell to 3.8%, from 4% in January.
- The number of people in the labor force remained steady, with the labor force participation rate holding at 63.2%.
- Construction employment fell off a cliff, losing 31,000 jobs in February—the biggest drop in six years.
- December job gains were revised up from 222,000 to 227,000, while January was revised up to 311,000 from 304,000.
There are some noticeable winners and losers.
- Employment continued to trend up in professional and business services in February (+42,000), in line with average monthly growth over the prior 12 months.
- Healthcare added 21,000 jobs in February. Over the past year, health care employment rose by 361,000.
- Employment in wholesale trade continued to trend up in February (+11,000). Over the year, the industry has added 95,000 jobs.
- Construction employment fell by 31,000 in February, partially offsetting a gain of 53,000 in January. Employment in heavy and civil engineering construction decreased by 13,000 in February. Over the year, construction employment was up by 223,000.
- Manufacturing employment showed little change over the month (+4,000). Over the prior 12 months, manufacturing had added an average of 22,000 jobs per month.
- Employment in leisure and hospitality was unchanged in February, after rising by 89,000 in January and 65,000 in December. Over the year, employment in the industry increased by 410,000, mostly in food services and drinking places.
- Employment in other major industries—including mining, retail trade, transportation and warehousing, information, financial activities and government—showed little or no change over the month.
- Average hourly earnings of all employees on private nonfarm payrolls rose by 11 cents in February to $27.66.
- In the past 12 months, average hourly earnings have grown by 3.4%.
From a microeconomics perspective, as the CEO of a major recruiting firm, I question some of the conclusions drawn from the data. We have not seen significant salary offers to job seekers. If the labor market is as tight as claimed, it would be reasonable to believe that job offers would go much higher to attract a smaller pool of applicants, but we are not seeing this happen. A tight job market would also require materially enhancing the compensation of existing employees in an effort to retain them in a tight job market. We are not seeing this trend happening either. We are noticing, however, the shifting of jobs by major corporations from high-cost cities, such as New York City, to less expensive locations. More new jobs may be created in certain states with lower pay, while highly compensated and experienced employees experience downsizing. There could be new additional jobs, but the people are paid less. Furthermore, older workers—who are the ones earning more—are pushed out of work.
Additionally, from the résumés my firm receives, it is shocking to see the amount of part-time workers, underemployed and people in the gig economy—who will be officially classified as working, but are desperately trying to obtain real jobs that fit their educational background and experience.
I’m concerned that the numbers don’t include or adequately reflect the large number of people who technically have jobs that are not at the level or compensation that they feel they deserve. Also, the numbers conveniently leave out those who have given up trying to find an appropriate-level position relative to their background and experience.