February 2022 Employment Report

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The Bureau of Labor Statistics‘ (BLS) establishment survey showed non-farm employers added a 678,000 jobs in February (exceeding the 390,000 expected). In addition, December and January employment changes were revised up by a combined 92,000 (December: +78,000; January: +14,000). Meanwhile, the unemployment rate (based upon the BLS’s household survey) edged back down to 3.8%, as the number of unemployed fell (-243,000) despite the number of (re)entrants to the civilian labor force rising (+304,000). 

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Observations from the employment reports include:

* The correspondence between the establishment (+678,000 jobs) and household surveys (+548,000 employed) was much better this month than has often been the case.

* Goods-producing industries added 105,000 jobs; service-providers: +573,000. Job gains occurred in temporary help services (+36,000), management of companies and enterprises (+12,000), management and technical consulting services (+10,000), and scientific research and development services (+8,000). The only industry showing a significant job loss was motor vehicles and parts (-18,000), likely a result of the ongoing chip shortage.

Manufacturing added 36,000 jobs (compared to January’s +16,000). That result is somewhat at odds with the change in the Institute for Supply Management’s (ISM) manufacturing employment sub-index, which expanded more slowly in February. Wood products employment rose by 2,100 (ISM was unchanged); paper and paper products: +3,100 (ISM was unchanged); construction: +60,000 (ISM rose).

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* The number of employment-age persons not in the labor force declined (-183,000) to 99.3 million; that level is 4.3 million higher than in February 2020. With the labor force expanding, the employment-population ratio (EPR) edged up to 60.0%, another pandemic high; even so, the EPR is 1.3PP below the February 2020 level. 

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* Because the civilian labor force expanded by 304,000 in February, the labor force participation rate rose fractionally to 62.3%. Average hourly earnings of all private employees increased by $0.01 (to $31.58), and the year-over-year increase decelerated to +5.1%. For all production and nonsupervisory employees (shown above), the tale was a bit better: hourly wages rose by $0.8, to $26.94 (+6.7% YoY). Since the average workweek for all employees on private nonfarm payrolls expanded by 0.1 hour, to 34.7 hours, average weekly earnings rose (+$3.51) to $1,095.83 (+5.4% YoY). With the consumer price index running at an annual rate of +7.5% in January, the average worker continues to lose purchasing power.

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* Full-time jobs rose (+642,000) to 131.8 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 -- advanced by 418,000, along with those working part time for non-economic reasons (+469,000); multiple-job holders edged down 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 dropped by $15.0 billion, to $258.2 billion (-5.5% MoM; +11.6% 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 25.4% above the year-earlier average. One might have expected taxes to rise in concert with the improved hiring, but February's employment taxes are not due until March 15.

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.