February Jobs Report on Solid Ground, Pre-Coronavirus
Total nonfarm payroll employment blew though expectations in February, adding 273,000 job, the Bureau of Labor Statistics reported Friday.
The report said the unemployment rate fell slightly to 3.5 percent, matching its lowest rate in 60 years. The unemployment rate has been either 3.5 percent or 3.6 percent for the past six months. The report cited job gains in health care and social assistance, food services and drinking places, government, construction, professional and technical services and financial activities.
By contrast, in 2019, job growth averaged 178,000 per month.
The labor force participation rate remained at 63.4 percent in February. The employment-population ratio, at 61.1 percent, changed little over the month but was up by 0.4 percentage point over the year.
BLS revised December’s numbers upward by 37,000 from +147,000 to +184,000; January’s numbers were revised up by 48,000 from +225,000 to +273,000. With these revisions, employment gains in December and January combined were 85,000 higher than previously reported. After revisions, job gains have averaged 243,000 per month over the past three months.
“February’s much stronger job growth than expected is great news for the housing market,” said Mike Fratantoni, Chief Economist with the Mortgage Bankers Association. “Construction jobs notably increased as well, around triple the pace of monthly hiring in 2019. Strong job growth, coupled with a faster pace of home construction and record low mortgage rates, sets us up for a very active spring market.”
The caveat, Fratantoni noted, is the uncertainty regarding the coronavirus. “The purchase application data in MBA’s Weekly Applications Survey will be a great barometer of future homebuyer demand, as activity last week was already 10 percent higher than a year ago,” he said.
Odeta Kushi, Deputy Chief Economist with First American Financial Corp., Santa Ana, Calif., also acknowledged the strength of the economy prior to coronavirus developments.
“As long as the unemployment rate stays at half-century lows, as today’s report indicates, then economic theory suggests economic growth will continue,” Kushi said. “Economic theory states rising unemployment reduces economic growth. Less demand for labor – rising unemployment – is indicative of decreased demand for goods and services – slower economic growth.”
Kushi said on the housing front, builders continue to benefit from a milder winter and historically low mortgage rates. “The growth in residential construction jobs supports further improvement in the pace of home building because building a home does not readily lend itself to outsourcing and automation,” she said. “It’s very hard to increase housing starts without increasing residential construction employment and productivity.”
But Sarah House, Senior Economist with Wells Fargo Securities, Charlotte, N.C. said the “bright state is unlikely to last,” as temperatures return to normal and the impact from COVID-19 containment efforts manifest.
“Today’s jobs report is old news,” House said. “The Fed is already looking ahead to the ripple effects of efforts to contain COVID-19, so today’s report does not change our assumption for additional easing before the end of Q2.”
House said the COVID-19 environment stands to impact hiring in the service sector much more directly, in addition to dealing another blow to the manufacturing and mining industries. “Delayed shipments, canceled travel and forgone outings are ripe to reduce hiring in the months ahead,” she said. “Hours are also likely to be cut, although there too the starting point looks better with an uptick in February.”
BLS said average hourly earnings for all employees on private nonfarm payrolls increased by 9 cents in February to $28.52. Over the past 12 months, average hourly earnings have increased by 3.0 percent. Average hourly earnings of private-sector production and nonsupervisory employees increased by 8 cents to $23.96 in February.
The report said the average workweek for all employees on private nonfarm payrolls rose by 0.1 hour to 34.4 hours in February. In manufacturing, the workweek increased by 0.2 hour to 40.7 hours, and overtime edged up by 0.1 hour to 3.2 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls increased by 0.1 hour to 33.7 hours.
