February Payrolls Jump but Details Are Less Robust


U.S. nonfarm payrolls added 379,000 jobs in February after a gain of 166,000 in January and a loss of 306,000 in December. The two prior months had net upward revisions of 38,000 with December revised down by 79,000 but January revised up by 117,000. The February gain brings the ten-month post-plunge recovery to 12.887 million but is still far from offsetting the 22.362 million loss in March and April, leaving nonfarm payrolls 9.475 million or 6.2 percent below the February 2020 peak (see first chart).

Private payrolls rose an even more impressive 465,000 jobs in February after a 90,000 gain in January and a 274,000 loss in December. The two prior months had a net upward revision of 14,000 with December revised down by 70,000 and January revised up by 84,000. The February gain brings the ten-month recovery to 13.267 million versus a loss of 21.353 million in March and April, leaving private payrolls 8.086 million or 6.2 percent below the February 2020 peak (see first chart).

The details of the report are less robust than the headline gains suggest. Most of the gain in total payrolls was accounted for by just one industry: leisure and hospitality, which added 355,000 employees for the month. That gain largely offset a drop of 498,000 in December (see second chart).

Overall breadth of gains for February were modest with seven private categories showing a drop while eight had gains. Within the 465,000 gain in private payrolls, private services added 512,000 while goods-producing industries lost 48,000. For private service-producing industries, the gains were led by a 355,000 surge in leisure and hospitality (largely offsetting a 498,000 drop in December, as mentioned above), a 63,000 rise in business and professional services, a 46,000 gain in health care and social assistance, and a 41,000 rise in retail. Other private services categories had very small changes (see second chart).

Within the 48,000 drop in goods-producing industries, construction lost 61,000 jobs, durable-goods manufacturing increased by 17,000, nondurable-goods manufacturing rose by 4,000, and mining and logging industries lost 8,000 jobs (see second chart).

One year after the peak in employment in February 2020, every private industry group still has fewer employees. The net losses range from about 8,600 in utilities workers to a devastating 3.5 million in leisure and hospitality (see third chart).

On a percentage basis, the losses are more evenly distributed. Leisure and hospitality still leads with a 20.4 percent drop since February, however, mining and logging comes in second with an 14.6 percent loss followed by education services at 10.3 percent and information services at 8.5 percent. Seven of the 14 private industries shown in the report have declines of 4 percent or more since February 2020 (see fourth chart).

The government sector lost 86,000 employees in February, with local government payrolls falling by 44,000, state government payrolls off 39,000, and the federal government cutting 3,000 workers.

Average hourly earnings rose 0.2 percent in February, putting the 12-month gain at 5.3 percent. The average hourly earnings data should be interpreted carefully, as the concentration of job losses for lower-paying jobs during the pandemic distorts the aggregate number.

The average workweek decreased in February, falling 0.3 hours to 34.6 hours. Combining payrolls with hourly earnings and hours worked, the index of aggregate weekly payrolls fell 0.3 percent in February following a 0.7 percent gain in January. The index is down 0.8 percent from a year ago.

The total number of officially unemployed fell to 9.972 million in February, a drop of 158,000 from January. The number of officially unemployed in February 2020 was just 5.796 million.

The unemployment rate fell to 6.2 percent while the underemployed rate, referred to as the U-6 rate, was unchanged at 11.1 percent in February. In February 2020, the unemployment rate was 3.5 percent while the underemployment rate was 7.0 percent (see top of fifth chart).

The participation rate was unchanged in February, coming in at 61.4 percent versus a participation rate of 63.3 percent in February 2020. The employment-to-population ratio, one of AIER’s Roughly Coincident indicators came in at 57.6 for February, above the 57.5 ratio in January but well below the 61.1 percent in February 2020 (see bottom of fifth chart).

The February jobs report shows a strong headline gain in private payrolls, but the gain was concentrated in one industry: leisure and hospitality. The breadth of gains across the economy was modest in February, and for nearly all private industries, employment is still below pre-pandemic levels, quite substantially below in some cases.

Government restrictions on consumers and businesses remain a significant threat to the outlook for economic growth. The distribution of vaccines is a very positive development and is starting to lead to less government restrictions and less government distortion of economic activity. In the meantime, the longer consumers remain restricted and businesses remain closed or limited, the more uncertain a labor market recovery becomes and the higher the probability of a slow and drawn-out economic recovery.



* This article was originally published here
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