February Job Numbers Are Good But Fragile
After two months of the ADP National Employment Report and the BLS Employment Situation Report being fundamentally at odds, for February the two labor reports are broadly in agreement once more (this is the expected and historical norm). The Employment Situation Report especially exceeded expectations with a stellar 678,000 jobs added—only time will tell if that number is an outlier or the start of an expanding economic trend.
That said, the positive numbers in both reports carry caveats which underscore the continued frailty of the US economy—a reality which can only be amplified by a chaotic global situation as Putin's Ukrainian War and sanctions on Russia continue to roil markets.
ADP: Just Rewrite History
ADP posted a respectable jobs outlook with 475,000 jobs added to ADP payrolls. However, that job creation was weighted heavily in favor of big business; companies of 500 employees or more saw over half a million new jobs, while small businesses of under 50 employees actually lost almost 100K jobs.
The ADP payroll data shows job and economic growth to be demonstrably uneven.
Yet the most striking part of the February report is its ginormous revision to the January numbers, adding over 800K jobs and turning a 300K job loss into a 500K jobs gain.
ADP didn't even attempt any Abbot and Costello math to cover it up. They merely rewrote the number.
The matched sample used to develop the ADP National Employment Report was derived from ADP payroll data, which represents 460,000 U.S. clients employing nearly 26 million workers in the U.S. The January total of jobs added was revised from -301,000 to 509,000.
Where that blatant bit of revisionism leaves the report's credibility is for the reader decide.
BLS: Lots Of Jobs, Not A Lot Of Dollars
As ZeroHedge noted this morning before the BLS numbers came out, the consensus expectation was essentially a repeat of the ADP numbers, with roughly 423K jobs added in February.
Consensus expects the February jobs report at 8:30am ET to show nonfarm payrolls increase of 423k vs 467k in January, with the Bloomberg crowd- sourced whisper number slightly lower at 401k. Notably, the pace of hiring is expected to confirm Fed’s assessment that the labor market is strong enough to withstand rate hikes. The unemployment rate is expected to decline to 3.9%.
The BLS Report blew way past expectations by reporting some 678,000 jobs created, and an unemployment drop to around 3.8%:
Total nonfarm payroll employment rose by 678,000 in February, and the unemployment rate edged down to 3.8 percent, the U.S. Bureau of Labor Statistics reported today. Job growth was widespread, led by gains in leisure and hospitality, professional and business services, health care, and construction.
Even more encouraging was the increase in the labor force participation rate to 62.3%.
This increase was largely driven by a drop in the number of people not in the labor force who want a job.
The number of persons not in the labor force who currently want a job declined by 349,000 to 5.4 million in February. This measure is above its February 2020 level of 5.0 million. These individuals were not counted as unemployed because they were not actively looking for work during the 4 weeks preceding the survey or were unavailable to take a job.
However, the strong jobs gains are not matched by wage growth, with both hourly and weekly average earnings essentially unchanged.
With inflation still running red hot, stagnant wages mean workers are losing money to rising prices.
Part-time Is Popular
Equally concerning is the rise in part-time work for economic reasons.
The number of persons employed part time for economic reasons increased by 418,000 to 4.1 million in February but remains below its February 2020 level of 4.4 million. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs.
Essentially, just over 60% of jobs added in February were not full-time jobs. Not only does this reduce wages, but part-time employment for economic reasons by definition means workers are not finding and are not being offered full-time jobs even though that is desired.
The ramifications of this are made clear by comparing the U-6 labor underutilization rate to the unemployment rate. While the unemployment rate went down in February, the underutilization rate rose to 7.2%
The US put more people to work in February but got less labor to show for jobs added.
Anemic Growth Is Still Growth, But Just Barely
Taking the employment reports in total and at face value (i.e., pretending the shenanigans of the past few months haven't happened), they paint a picture of economic growth that looks good on the surface, but on closer examination is in fact fairly anemic. More jobs are good, but stagnant earnings in a period of high inflation means people are working and getting less compensation in return.
Majority job growth among part-time work means wages and hours for individual worker are more variable and less reliable, fueling economic uncertainty rather than job security.
That lack of certainty means an employment situation that is overall good today, but provides little foundation on which to expect continued growth and improvement.
How best to describe the state of the United States economy? In a word, “fragile”.