U.S. Labor Market Continues to Strengthen: 235,000 New Jobs in February
March 13, 2017
Marcus Winbush, CFP® — CEO, True North Capital Alliance
The February jobs report issued by the U.S. Labor Department on Friday, March 10th exceeded analysts’ projections by a long shot. Including February’s data, total nonfarm payroll employment has been on a rising trend, averaging 209,000 new jobs per month over the past three months. That’s a significant tick up from last year’s pace of 180,000 net new jobs per month, which Fed Chair Yellen noted as satisfactory when she spoke in Chicago on March 3rd. Chair Yellen noted that “economic developments since mid-2016 have reinforced the Committee’s confidence that the economy is on track” to achieve the Fed’s statutory goals of maximum employment and price stability.
Given the strength of the February jobs report, most analysts expect the Fed to make the first of this year’s projected rate increases when the policy committee meets this week (March 14-15).
February Jobs Report by the Numbers
In February, total nonfarm payroll employment increased by 235,000 jobs:
- Sectors: Strongest growth was in construction (up 58,000), private educational services (up 29,000), manufacturing (up 28,000), and health care (up 27,000).
- Unemployment Rate: The unemployment rate went down slightly from the previous month to 4.7 percent. Compared with 4.9 percent a year earlier, overall unemployment is continuing a stable downward trend. Although the overall employment picture is brighter, jobless rates for some segments of the population continue unchanged (Blacks at 8.1 percent; Hispanics at 5.6 percent).
- Labor Participation Rate: The labor participation rate sits at 63.0 percent. This measure reflects an additional 447,000 people in the labor market over the January total.
- Long-Term Unemployed: The number of individuals who have been jobless for 27 weeks or more was essentially unchanged at 1.8 million (23.8 percent of those who are unemployed). However, the total number of long-term unemployed declined by 358,000 over the past year.
- Involuntary Part-Time Workers: Workers in this category would have preferred full-time employment but were working part-time for economic reasons. The number of people in this category showed little change at 5.7 million.
The earnings data was an especially bright spot in the February report. Average hourly earnings across all employees increased by 6 cents to $26.09; this growth follows a 5-cent increase in January.
Thus, overall job gains remain solid and broad-based, and unemployment is in line with Fed expectations for the longer run.
Case for Scaling Back Monetary Policy Accommodations
Since 2014, the Fed has been gradually scaling back monetary policy accommodations, such as quantitative easing and low federal funds rate, previously needed to support the U.S. economy through the aftermath of the 2008 financial crisis. This process has been slower than many expected, but the Federal Open Market Committee (FOMC) were determined to proceed with caution giving the U.S. economy time to strengthen. In her March 3rd comments, Chair Yellen noted that the “U.S. economy has exhibited remarkable resilience” in recent years.
Yellen gave her clearest signal yet of the Fed’s next move: “…we currently judge it will be appropriate to gradually increase the federal funds rate if the economic data come in about as we expect.” Certainly, the February jobs report will be viewed as a strong confirmation.
Heading into the March 14-15 meeting, the FOMC seems to be lining up in favor of raising rates—likely another quarter-percent increase taking rates to a range of .75 to 1.00 percent.
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