February 2021 Employment Report

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The Bureau of Labor Statistics’ (BLS) establishment survey showed non-farm employers added 379,000 jobs in February (handily beating consensus expectations of +140,000). December and January employment changes were revised up by a combined 38,000 (December: -79,000: January: +117,000). Meanwhile, the unemployment rate (based upon the BLS’s household survey) edged down by 0.1 percentage point (to 6.2%) the ranks of the employed swelled much faster (+208,000) than the civilian labor force (+50,000). 

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Observations from the employment reports include:

* The establishment (+379,000 jobs) and household surveys (+208,000 employed) were reasonably well correlated. 

* Goods-producing industries gave up 48,000 jobs, while service-providing employment added 427,000 positions. Most of the job gains occurred in leisure and hospitality (+355,000 or 94% of net jobs added) -- of which 285,900 were in food services and drinking places -- with smaller gains in temporary help services (+52,700), health care and social assistance (+45,600), and retail trade (+41,000). Employment declined in state and local government education (-68,600), and support activities for mining (-6,200). Manufacturing expanded by 21,000 jobs. That result is consistent with the Institute for Supply Management’s (ISM) manufacturing employment sub-index, which rose faster in February. Wood Products employment ticked down by 1,100 (ISM was unchanged); Paper and Paper Products: -1,000 (ISM declined); Construction: -61,000 (ISM increased).

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* The number of employment-age persons not in the labor force edged up (18,000) to 100.7 million. However, the employment-population ratio (EPR) ticked up to 57.6%; i.e., nearly six in 10 of the employment-age population are presently employed. 

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* Because the civilian labor force expanded by a meager 50,000 in February, the labor force participation rate was unchanged at 61.4%. Meanwhile, average hourly earnings of all private employees rose by $0.07 to $30.01, resulting in a 5.3% year-over-year increase. For all production and nonsupervisory employees (pictured above), hourly wages rose by $0.04, to $25.19 (+5.1% YoY). Since the average workweek for all employees on private nonfarm payrolls contracted by 0.3 hour, average weekly earnings decreased by $6.56, to $1,038.35 (+4.2% YoY). With the consumer price index running at an annual rate of +1.4% in January, whether consumers are keeping up with price inflation depends primarily upon whether or not they are working.

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* Full-time jobs fell (-122,000) to 124.9 million. Workers employed part time for economic reasons (shown in the graph above) -- e.g., slack work or business conditions, or could find only part-time work -- rose by 134,000, whereas those working part time for non-economic reasons retreated by 150,000; multiple-job holders advanced by 55,000.

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For a “sanity test” of the job numbers, we consult employment withholding taxes published by the U.S. Treasury. Although “noisy” and highly seasonal, the data show the amount withheld in February edged up by $6.1 billion, to $231.4 billion (+2.7% MoM; +3.8% YoY). To reduce some of the monthly volatility and determine broader trends, we average the most recent three months of data and estimate a percentage change from the same months in the previous year. The average of the three months ending February was 0.7% above the year-earlier average.

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.