Labor Report Shows Signs of Tightening
Employers added just 20,000 jobs in February, the Bureau of Labor Statistics reported Friday.
The drop came despite upward revisions in December from +222,000 to +227,000, and in January from +304,000 to +311,000. With these revisions, employment gains in December and January combined were 12,000 more than previously reported. After revisions, job gains averaged 186,000 per month over the past three months.
“Job growth unexpectedly dropped in February, including a decline in construction jobs,” said Mortgage Bankers Association Chief Economist Mike Fratantoni. “However, some of this decrease may be a result of the bad weather in February. The decline in the unemployment rate and the further increase in wage growth shows a job market that is still quite strong, even if we may be near the top of the current economic cycle.”
BLS said the unemployment rate declined to 3.8 percent; the number of unemployed persons decreased by 300,000 to 6.2 million. The labor force participation rate held at 63.2 percent in February. The employment-population ratio, at 60.7 percent, was unchanged over the month but was up by 0.3 percentage point over the year.
BLS reported the average workweek for all employees on private nonfarm payrolls decreased by 0.1 hour to 34.4 hours in February. In manufacturing, the average workweek declined 0.1 hour to 40.7 hours, while overtime was unchanged at 3.5 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls fell by 0.2 hour to 33.6 hours.
The report said in February, average hourly earnings for all employees on private nonfarm payrolls rose by 11 cents to $27.66, following a 2-cent gain in January. Over the year, average hourly earnings have increased by 3.4 percent. Average hourly earnings of private-sector production and nonsupervisory employees increased by 8 cents to $23.18 in February.
“This month’s decline in construction employment is yet another headwind for new home construction, suppressing the critical need to build more homes and alleviate the housing supply shortage,” said Mark Fleming, chief economist with First American Financial Corp., Santa Ana, Calif. “Residential construction employment fell this month and since hammers build homes, labor shortages increase the cost of building and slow the pace of construction, which is not what’s needed to alleviate the housing supply shortage.”
Sarah House, senior economist with Wells Fargo Securities, Charlotte, N.C., noted despite the slower hiring trend, job growth remains strong enough for further labor market tightening, with unemployment down and wages up.
“Through the extreme swings in payroll gains the past few months, the trend in job growth is moderating,” House said. “The slower trend in job growth looks consistent with the upward drift in jobless claims and softer survey readings on hiring from recent purchasing manager indices the past few months.”
