February's Jobs Picture Was Even Better Than it Seemed

Posted by jbrumley on March 9, 2018 5:28 PM

Think February's job report was good, with 313,000 (the best since mid-2016) new payrolls coming online? It was. And yet, the splashy headline may actually understate how strong the employment picture is now.

It's a point we've made before, but it bears repeating now - the job growth an unemployment numbers aren't the whole story. They're just the beginning of the story. Even so, the first chapter of the February jobs report story is a good one... not enough to push the unemployment rate any lower from January's reading of 4.1%, but at 4.1%, the nation's economy is at or near maximum employment.

The employment data also showed us progress on another important front... wages. Though hourly earnings were only up 0.2%, that's solid in light of the string of successive improvements we've seen since the beginning of 2016. In the same vein, the length of the average workweek ticked a little higher in February, bolstering paychecks just a little more.

In step with the job growth pace is the number of people who are employed, and the number of people who are not employed [though the data usually moves in tandem, intuitively, it's not a foregone conclusion. For example... well, we'll do the math for you.] As of the end of February, 155.215 million people held a job in the United States, up 785,000 from January's reading. Conversely, only 6.706 million were officially out of work by February, down slightly from January's total - by 22,000 - of 6.684 million. Most encouraging of all, the number of unemployed people who aren't in the labor people but do want a job fell 212,000 from 5.364 million to 5.152 million.

The trend finally moved the needle on a front that had been annoyingly stagnant - the labor force participation rate. With last month's activity, the employed/population ratio jumped to 60.4%, matching the multi-year high hit in September. And, the labor force participation rate jumped to 63.0%, also matching a recent multi-year high.

It's too soon to say the jobs aspect of the economy has reached a tipping point. In terms of the number of people unemployed, we're already past that point. In terms of the number of people who are even interested in getting a job or looking for a job, one good month doesn't make a trend. When you add that data to the ongoing increases in paychecks and the uptick in the number of hours worked per week though, it's not wrong to start talking about the possibility that we may be reaching a critical mass of self-sustaining growth.

And yes, this will be good for the global economy, and particularly good for the American economy. The United States alone accounts for about a fourth of the world's commerce, and consumerism drives about 2/3 of the nation's revenue-bearing business. With more disposable income in people's pockets, the biggest piece of business in the U.S. stands ready to soar. There will be trickle-out effect.

One or two more great jobs reports and one more two good months of robust economic data could do the trick.