February 2015 Employment Report

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According to the Bureau of Labor Statistics’ (BLS) establishment survey, non-farm payroll employment increased by 295,000 jobs in February -- besting expectations of 230,000. Meanwhile, the unemployment rate (based upon the BLS’s household survey) dropped by 0.2 percentage point (to 5.5%) thanks to a combination of job gains (96,000) and individuals dropping out of the workforce (354,000). Observations from the employment report include:

• The disparity between the establishment survey (+295,000 jobs) and the household survey (+96,000 jobs) was noticeable again in February.
• We are somewhat skeptical of the employment report accuracy -- especially when the seasonal adjustment is practically equal to the initial value, as was the case in February (see table above).
• The oil-sector downturn is beginning to be reflected in the employment report; the Mining & Logging category (which includes oil extraction) was the only super-sector to exhibit seasonally adjusted contraction.
• Nearly 60% (171,000) of private-sector job growth occurred in the three super-sectors typically associated with the lowest-paid jobs: Profession & Business Services; Education & Health Services, and Leisure & Hospitality.
• The ongoing narrowing in the number of Manufacturing versus Food Service & Drinking Places (FS&DP) jobs continued in February. Interestingly, in January 2000, there were 9.2 million more U.S. manufacturing jobs than FS&DP jobs. In February 2015, the gap had shrunk to 1.3 million. Although the number of manufacturing jobs was 208,000 higher than February 2014, the concurrent growth rate in FS&DP jobs was more than double that (+449,500). 

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• The employment-population ratio was stable at 59.3%, but the number of employment-age persons not in the labor force jumped (+354,000) back to 92.9 million -- equal to the record high set back December 2014. 

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• The labor force participation rate ticked lower by 0.1 percentage point (to 62.8%), near its multi-decade low of 62.7%. Average hourly earnings of all private employees crept up by $0.03, resulting in a 2.0% year-over-year increase. For all production and nonsupervisory employees (pictured above), wages were unchanged (+1.6% YOY). With the CPI running at an official annual rate of -0.1%, wages are technically rising in real (inflation-adjusted) terms. 

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• Finally, full-time jobs increased (+123,000) while part-time jobs fell (-75,000). Full-time jobs have been trending higher since December 2009, but are still 1.04 million short of the pre-recession high. Part-time jobs, by contrast, have been stuck in a channel between roughly 27 and 28 million.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.