An Employment Report to Celebrate
The February employment report confirms our view that the recovery is firmly on track despite the headline loss of 36,000 jobs. It’s clear that the blizzards took a heavy toll on the figures.According to the Bureau of Labor Statistics, for example, the number of people with jobs that couldn’t make it to work because of the weather exceeded 1.1 million -- the fourth highest monthly result in 34 years of tracking. We estimate that the weather’s impact subtracted 150,000 jobs from February payrolls. Had the weather gods been more favorable, the net change in total employment would have been solidly in the black, posting the best monthly gain since November 2007.
There’s plenty in the report to cheer. Specifically, the unemployment rate remained at 9.7% instead of rising, as most analysts had expected. When the jobless rate fell to that level in January, from 10% in December, the decline was mostly viewed as aberrant with a reversal likely in February. Holding at 9.7% however, indicates that labor market slack has truly diminished. The typical duration of unemployment, at 19.4 weeks in February, also declined for the second consecutive month. While still high by any historical standard, the decline is welcome news and suggests that the glut of unemployed is beginning to wind down.
Additionally, continued hiring of temporary workers -- up 48,000 in February and 284,000 cumulatively over the past five months -- is a reliable sign that businesses are hedging their bets: They need to build staff but are fearful of making “permanent” hires. If the recovery matures and downside risks diminish, as we expect, these temporary positions will soon lead to full-time-payroll gains.
Naturally, estimates of the blizzard’s impact on the labor market are preliminary at this point, and another month of data will help clarify the true situation. Inclement weather tends to defer economic activity, not eliminate it entirely. Housing starts postponed one month are delayed to the next, and people make their way back to stores once the roads are clear. So, if the weather impact was as severe as we suspect, a March payroll gain in excess of 200,000 should be expected, ratifying the underlying improvement.
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