U.S. Jobs: Employment Numbers for February Remain Unexpectedly Strong

If you draw a line across the top of the bar for the past month's job gain of 311,000 against a graph for the period from January 2021 through Feb 2023, you'll see that it hits just below its mid-line. And well over half of those bars are taller than it is, with only 5 bars shorter.

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Statistically speaking, that puts February's results in the bottom 20 percent of job gains over that 26-month period. Nevertheless, labor economists were surprised, having forecast something more in the 200,000-to-220,000 range for the month. On expectation — and now, receipt — of this news, the major stock indices are trending downward, and the Volatility Index (aka VIX) is trending upward.

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All of this promises to realize a now-obligatory bump for the next rate hike at the upcoming Fed meeting on March 21 and 22. On the plus side, the unemployment rate eased back up to 3.6 percent, up by two-tenths percent from its near-historic low of 3.4 percent last month. That’s still pretty low, of course.

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How 'Bout Them Jobs Numbers, Please?

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The latest Employment Situation Summary from the U.S. Bureau of Labor Statistics starts its analysis of jobs added by market sector with this observation: "Total nonfarm payroll employment increased by 311,000 in February, compared with the average monthly gain of 343,000 over the prior 6 months."

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It makes the same point I made from a broader collection of data in the preceding paragraph — namely that this latest gain is trending downward from the recent trailing six-month average. Everybody seems to want to put this number into a context that says, "Wait! It’s not as strong as it looks."

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That said, here’s how the 311,000 number for February 2023 breaks down across the dozen-plus sectors that the U.S. BLS tracks every month:

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Leisure and hospitality waxed by 105,000 jobs in February (14,000 higher than the trailing six-month average of 91,000). Of that number, food services and drinking places took 70,000, and accommodations got 14,000. This sector remains down by 410,000 jobs (-2.4 percent) from pre-pandemic levels (the closest that it’s coming to achieving parity yet).

Retail trade added 50,000 jobs, of which 39,000 went to merchandise retailers. This sector has been stable for the past 12 months.

Government increased by 46,000 jobs, just slightly more than the trailing six-month average of 44,000 jobs. Local government accounted for most of that rise, with 37,000. Government remains slightly behind pre-pandemic levels, down by 376,000 jobs (1.6 percent).

Professional and business services waxed by 45,000 jobs, of which 12,000 went to management, scientific and technical consulting services. This is 10,000 higher than the six-month trailing average of 35,000 jobs. This sector is up from pre-pandemic levels as well.

Healthcare added 44,000 jobs, with 19,000 going to hospitals, and another 14,000 to nursing and residential care facilities. This month’s number is 10,000 down from the trailing six-month average of 54,000 jobs.

Construction increased by 24,000 jobs, more or less in line with the trailing six-month average of 20,000 jobs.

Social assistance employment waxed by 19,000 jobs, also not too far off the trailing six-month 22,000 jobs average.

Information (our home sector) lost 25 jobs, with both motion picture and sound recording (-9,000 jobs) and telecommunications (-3,000 jobs) trending downward. Employment in this sector is down by 54,000 jobs since November 2022, but still above pre-pandemic levels.

Transportation dipped by 22,000 jobs, with 9,000 of that in truck transportation. This sector is down by 42,000 jobs since October 2022, but still above pre-pandemic levels.

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Other tracked sectors are mostly unchanged. These include mining and related industries, manufacturing, wholesale trade, financial activities, and other services.

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This is an interesting picture. It shows growth in high turnover sectors where workers tend to come and go with great frequency (especially leisure and hospitality, and retail trade). But it shows some shrinkage in sectors that boomed during the pandemic (especially our home sector of information, plus transportation and warehousing).

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What I see here is a labor market that is settling down, and that may well be contracting just as the markets and the Fed might hope. Why do I say this? Because information is considered a harbinger for the overall labor market, and because transportation and warehousing serve online shoppers, so this could be an inkling of contracting consumer spending.

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Both things could very well be signaling that contraction is coming, if not starting already.

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Workers Want More Wages, But ...

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Average hourly earnings were up by 0.2 percent ($0.08 per hour) in February. Average hourly earnings of $33.09 are up by 4.6 percent over the last 12-month period. That’s still well under the inflation number, which for January came in at 6.4 percent (it’s just under 30 percent less, in fact).

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Nevertheless, the Fed’s caution is entirely understandable, and thus, it seems inevitable that the next rate hike will come in higher than the last one.

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Other Source, Other Voices

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Reportage from the Washington Post (WAPO) is looking for a silver lining. Its coverage of today’s report makes mention that "the labor market has shown signs of cooling, as demand for workers has gradually declined ... since last June.” It also states that: "The resilient labor market comes as a blessing for many workers, affording many the ability to switch into better jobs and negotiate raises over the past year and a half.”

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It further mentions that the labor force participation rate is finally starting to creep upwards (now at 62.5 percent). The picture is one of better-than expected growth, but one that suggests things continue to slow down.

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The Wall Street Journal (WSJ) is a little less optimistic in its reading of these latest tea leaves. It mentions increased consumer spending for January, and a bump in the inflation rate, along with increased business activity in February. Its analysis suggest that the job market remains “hot,” and cites Citigroup economist Veronica Clark, who says, "The labor market’s definitely been stronger at this point than we would have thought maybe six months ago."

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Their reporting also stresses growth in the relatively low-paying sectors of leisure and hospitality and the service end of healthcare, and says they're "more than off-setting" recent highly publicized cuts at tech companies including Alphabet, Amazon and Disney. They also cite "signs that strong hiring could continue" and make mention of the overall number of open jobs, ongoing needs for workers in the restaurant industry, and more.

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CompTIA (of which GoCertify is now a subsidiary) makes the following observations about this latest report. First, the drop of what they count as 11,184 tech sector jobs, and 38,000 tech occupation jobs represents miniscule losses of 0.2 percent (tech sector) and 0.6 percent(tech occupation) employment values. This plays against 5.5 million workers in the former, and 6.4 million in the latter, so it’s pretty incidental (and may be inside the noise threshold).

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Unemployment for tech occupations is at 2.2 percent (up very slightly) but still two-thirds of the current overall unemployment level (3.6 percent). CompTIA also observes that job postings are down by 40,000 since January, standing at 229,000. The Seattle market is up by more than 10 percent, with lesser gains in the bellwether towns of Salem, OR, and Little Rock, AR.

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Tech positions in professional, scientific and tech services industry sector (35,257), finance and insurance (24,735) and manufacturing (20,246) also showed healthy numbers for February. What’s down is only down slightly, and overall future prospects remain strong.

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Do I Look Worried? Should YOU Be Worried?

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All in all, the job market at large — and for information in particular — is still showing more strength than weakness. It will be interesting to see how things unfold in information in light of February’s modest dip. Overall, though, my sources and I remain bullish.

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Heck! I’m still not convinced that a soft landing is not more likely than unlikely. Stay tuned: We’ll all find out together what happens next!