February Jobs Report drops the bomb

In a surprise to almost everyone from barkeeps to bookies, the U.S. economy gained a paltry 20,000 jobs, in February, the smallest gain in over a year, in an economy that has been touted as the strongest ever --- from the White House, to sound and strong, from Fed Chair Jerome Powell.

With more than a few heads to scratch, who predicted 180,000, some wondered aloud at what happened, and one of them “Carl Tannenbaum, chief economist at Northern Trust in Chicago, said Friday’s news from the Labor Department was worrisome. “This is a disappointing report,” he said to The New York Times;. “I don’t think there’s any way to sugarcoat it.”

Some economists have other worries and are wary that there might be a recession, or at the very least a slowdown coming after the good times of recovery, yet others are saying that February is always a coin-toss coming after retail highs and lows of the holiday season, and smaller pocketbooks on both side of the shop, and that it’s more of a pause than a long lasting trend.

Americans are worrying about the economy and 56 percent say that it is slowing down, or entering into a recession, while 41 percent say it is growing. And, Gallup reported at the end of last month that 77% of Republicans think it’s growing, while 82% of Democrats say it’s slowing down or in recession.”

Before our analysis, let’s take a look at the good news: “3.4 percent year-over-year wage growth, the strongest in a decade. Revisions to previous months’ estimates added 12,000 jobs, bringing the average gains for December, January and February to 186,000. The official jobless rate fell to 3.8 percent, from 4 percent in January.”

“The report also showed signs that companies are paying up for employees in a tight market. Average hourly earnings for private workers rose 0.4 percent from the prior month, topping estimates, following a 0.1 percent gain. That indicates the economy may get a lift from wage increases at companies including Amazon Inc. along with Costco Wholesale Corp., which said Thursday it’s boosting starting wages,” reported Bloomberg News.

The question remains, as it has been for many months, is that enough to meet the needs of working Americans, and the answer, for many, is no.

  

CEO Jack Kelly writing for Forbes, gave some important qualitative observations, saying in part:

“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.”

But, then again, there was statistically significant change for some groups, and, “Among major worker groups, the jobless rate for Hispanics also declined sharply to 4.3 percent from 4.9 percent in January. The rate for African-Americans rose two-tenths of a point to 7 percent, while the level for whites declined to 3.3 percent from 3.5 percent,” cited CNBC.

Also a broader measure of employment that includes part-timers who would prefer full-time work and those too discouraged to search fell to 7.3 percent from 8.1 percent. “That’s a year’s worth of improvement in one month,” said G. Scott Clemons, chief investment strategist at the private bank Brown Brothers Harriman.”

The latter is the good news and provides a measure of stability -- if the trend can hold, and it was one indicator that bankers, economists and analysts alike have long been concerned about.

Bad weather and weak growth in wages have contributed to those leaning into hiring, but demurred in February, yet there are some signs of job expansion, by some companies, but just not enough of them, say some.

That wage increase, while still small, “may get a lift from wage increases at companies including Amazon Inc. along with Costco Wholesale Corp., which said Thursday it’s boosting starting wages,” continued Bloomberg.

Others are more sanguine; and there is a move by some companies to convert temps to permanent positions, according to staffing firm Adecco, but increases in that area, and others, vary by geographic region, with gains in one, and losses in the others.

The increase is not seen in rural areas, and the Times quoted the “Brookings Institution’s Hamilton Project [who] found that “rural counties — the majority of which were already struggling — seem to be increasingly left behind with employment barely growing over the last five years.”

For those readers looking for a formula here is one: “The jobless rate fell in part because of the vagaries the Labor Department uses to calculate the headline rate — there was an increase of 198,000 in those considered not in the labor force, while those classified as unemployed fell by 300,000 and the ranks of the employed decreased by 45,000, according to the household survey,” also reported CNBC.

It is important to know that recovering from any depression is patchy, and there are those that are more pessimistic.

“I don’t think you want to say that 20,000 is the new trend, but the trend probably is shifting down,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. “It’s hard to know with precision how much of a downshift there will be. We’ll see job growth better than this, but not as good as we saw last year.”

Showing optimism is “Ryan Sweet, head of monetary policy research at Moody’s Analytics Inc,” who noted, “There's no reason to panic. You average the couple months together and the jobs market is still doing well. Job growth will slow this year, as the economy begins to moderate. But 20,000 jobs is not what we’re going to be creating month-in and month-out.”

“William H. Stoller, chairman and chief executive of Express Employment Professionals, which is based in Oklahoma City,” said, “I’ve been in this business over 40 years, and February always presents kind of a pause.”

He is not alone, and Constance Hunter, chief economist at KPMG LLP, said on Bloomberg Television, “There was always going to be noise in this as a result of the shutdown.”

The partial government shutdown by President Trump also clouded the report and gave the lows, but also some false highs with industries like ride-sharing companies that had some federal workers driving to put food on the table, showing increases.

Bloomberg News may have summarized February the best: “Policy makers and economists are likely to wait for several months of weak hiring before concluding there’s cause for concern in the labor market. The figures also validate the Federal Reserve’s January decision to pause interest-rate hikes while awaiting signs of a more-persistent acceleration in inflation.”

Caution may be the watchword, and the increase in year-over-year wages to 3.4 may have encouraged some companies to remain bullish with hiring like “Ace Hardware, a cooperative of independently owned and operated hardware stores, expects an additional 160 stores will open this year, creating 2,500 jobs, said Kane Calamari, the company’s personnel chief.”

“The real challenge is the shortage of people,” said Tom Gimbel, chief executive of LaSalle Network, a staffing firm in Chicago, added, and that remains good for the more urban markets, but it seems based on prior reports that cautious optimism reigns.