February job gains point to strengthening economy

Bakery now hiring

By Karen Lentz

The unemployment rate edged down to 4.7 percent in February, as 235,000 jobs were added during the month, the U.S. Bureau of Labor Statistics reported Friday. The rate is a slight drop from 4.8 percent in January, indicating continued movement toward recovery from the 2007-2009 recession.

The biggest job gains occurred in construction, which increased by 58,000 jobs in the month. Private educational services, manufacturing, and health care sectors each saw gains of over 25,000.

Losses occurred in retail trade, which dropped by 26,000 jobs in February, following a gain of 40,000 in the prior month. Over the month, general merchandise stores reported job losses of 19,000.

Employment in professional and business services continued to trend up in February, adding 37,000 jobs, including 5,100 in employment services. The sector has added 597,000 jobs over the year.

The February data represent the first full month of the Trump administration, and are a key information source to the Federal Open Market Committee scheduled to meet next week to consider interest rate adjustments.

“We’ve been following this trend for several years now. The labor market is getting stronger, fewer people are looking for work, and the labor force is actually growing, which hasn’t happened for a while,” Darren Lubotsky, associate professor of economics at the University of Illinois at Chicago, said.

“Today reinforces that most of the numbers are back to where they were before the recession,” Lubotsky said.

The Fed has a dual mandate to minimize inflation and maximize employment, and has been increasing interest rates at a gradual pace as the economy moves away from recession.

“If there were any remaining doubts the Fed would raise rates next week, today’s report put them to rest. Job growth was strong, the unemployment rate is below the Fed’s long-term goal, and wages are accelerating,” Brian Wesbury, chief economist at First Trust Advisors LP, wrote in a posted comment.

Earlier in the week, the national employment report published by Automatic Data Processing Inc. on Wednesday showed a gain of 298,000 private sector jobs in February. Gains occurred in both goods and services production across industries including construction, mining, and manufacturing, further indications of a growing economy.

“February proved to be an incredibly strong month for employment, with increases we have not seen in years,” Ahu Yildirmaz, vice president and co-head of the ADP Research Institute, said in a release on Wednesday’s report.

The report is derived from ADP payroll data, which represents 411,000 U.S. clients employing nearly 24 million workers in the U.S.

The strong jobs performance was helped in part by warmer weather. Wesbury noted that in the past 20 years, an average of 307,000 workers missed work due to weather in February, while this February it was only 157,000.

February 2017 broke several daily high temperature records in Chicago, including decreased snow cover nationwide.

Jobs data reported by the statistics bureau comes from establishment surveys of employers, which have been updated for 2017, and household surveys, also updated for 2017 to reflect newer population estimates.

The household survey and establishment survey both produce estimates of employment based on samples of the population. The establishment survey has a smaller margin of error because of its larger sample size. However, the household survey has a more expansive scope than the establishment survey because it includes self-employed workers.

“Importantly, basic trends from these two sources are pretty consistent with one another,” Lubotsky said.

To be counted as unemployed, an individual must be over 16, not currently employed, available to work, and have sought work in the last four weeks.

“They [jobs reports] may have been phony in the past, but it’s very real now,” White House Press Secretary Sean Spicer quoted the president as saying Friday in response to the report.

During the campaign season, the president cited a belief that the statistics bureau’s unemployment numbers were not telling the whole story, with the unemployment rate failing to account for those who have given up looking for work.

“You just give up. You go home. You say, ‘Darling, I can’t get a job.’ They consider you statistically employed,” Trump said at a rally in December.

Those who have stopped looking for jobs, a group referred to as discouraged workers, are not included in the official unemployment rate. However, the bureau does collect and report data on this population, which dropped to a non-seasonally adjusted 522,000 in February from 532,000 in January.

In the bureau’s calculation of a rate that includes discouraged workers as well as part-time workers who want to work full time, the seasonally adjusted unemployment rate for February was 9.2 percent, down from 9.4 percent in January and 9.8 last year.

“Because it is difficult to reflect all types of labor market realities in a single statistic, the bureau publishes five alternative measures of labor underutilization every month,” Stacey Flores of the Bureau of Labor Statistics said. “Two of these measures are more restrictive than the official unemployment rate, and three are broader, incorporating individuals who are not captured in the official measure.”

The various measures typically show very similar movements over the course of the business cycle, Flores said.

Unemployment Rate
The U.S. Bureau of Labor Statistics uses a variety of measures to capture unemployment.
U.S. Bureau of Labor Statistics, Civilian Unemployment Rate [UNRATE], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/UNRATE, March 10, 2017.
U.S. Bureau of Labor Statistics, Total unemployed, plus all marginally attached workers plus total employed part time for economic reasons [U6RATE], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/U6RATE, March 10, 2017.
(Karen Lentz/MEDILL)

The labor participation rate, which has been gradually declining, partially due to the aging of the population, ticked up in February to 63 percent from 62.9 percent in January.

Earlier in the recovery, the unemployment rate was going down, not because people were finding jobs, but because people were dropping out of the labor market, Lubotsky said. With the February report, the number of people who are actually employed is on the rise.

Photo at top: An Evanston bakery advertises job openings.(Karen Lentz/MEDILL)