United States: Labor market conditions continue to improve in February
Total non-farm payrolls increased by 379,000 in February, beating analysts’ expectations of a 182,000 increase. This follows January’s 166,000 increase in payrolls. Employment gains in leisure and hospitality, retail trade and manufacturing drove the headline reading.
The unemployment rate ticked down slightly to 6.2% in February from 6.3% in January, but the labor force participation rate was virtually stable at January’s 61.4% in February. Hourly earnings increased 0.2% month-on-month in February (January: +0.1% mom), while annual wage growth was broadly stable at 5.3%.
Commenting on the short-term outlook on the labor market, Katherine Judge, a senior economist at CIBC Economics, noted:
“All signs point to an acceleration in hiring in the spring and summer months. The pace of vaccination is accelerating, states continue to re-open, and another dose of fiscal stimulus is on the way. With the savings rate sitting at 20.5% as of January, households will have ample spending power for services once they re-open. With the outlook for the economy quickly improving, the output gap is set to close as early as later this year.”
Providing further context and analysis with regards to February’s jobs report, James Knightley, chief international economist at ING, noted:
“Wage growth of 5.3% YoY looks fantastic, but we should continue to ignore it due to the way it is calculated. Given that most of the jobs lost in the pandemic were low wage consumer services roles, such as retail, restaurant and bar work, the fact that these jobs no longer exist structurally lifts the “average” hourly pay rate of the people who are still working. It will be many more months before we get a clean wage growth figure. Likewise, the unemployment rate doesn’t tell us much about the state of the jobs market given very low worker participation rates. We prefer to look at employment as a proportion of working age population, which at 57.6% remains woefully low. Remember it was up at nearly 65% 20 years ago, so there is clearly a lot of slack in the US economy.”