BLS: Labor Market Adds 313,000 Jobs in February

Figure 1 shows the 3MMA of the number of jobs created monthly since 2000 as the brown bars and the total number employed as the black line. These numbers are seasonally adjusted by the BLS, which has been criticized in the past for the ineffectiveness of its seasonal adjustment calculations.

To examine if any seasonality is left in the data after adjustment, we have developed Figure 2. In the eight years since and including 2011, job creation in February has increased by 17.0 percent. This year, it rose by 31.0 percent and therefore was a very satisfactory result. January was also a month that far exceeded the norm.

Total nonfarm payrolls are now 9,812,000 more than they were at the pre-recession high of February 2008. November 2014 was the first month for total nonfarm employment to exceed 140 million and in February was 148.2 million. According to BLS data, the average workweek for all employees on private nonfarm payrolls rose by 0.1 hour to 34.5 hours in February. In manufacturing, the workweek increased by 0.2 hour to 41.0 hours, while overtime edged up by 0.1 hour to 3.6 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls increased by 0.2 hour to 33.8 hours. In February, average hourly earnings for all employees on private nonfarm payrolls rose by 4 cents to $26.75, following a 7-cent gain in January. Over a 12-month period, average hourly earnings have increased by 68 cents, or 2.6 percent. Average hourly earnings of private-sector production and nonsupervisory employees increased by 6 cents to $22.40 in February.

Table 1 breaks total employment down into service and goods-producing industries and then into private and government employees. Most of the goods-producing employees work in manufacturing and construction and the components of these two sectors of most relevance to steel people are broken out in Table 1.

In February, 287,000 jobs were created in the private sector and government gained 26,000 jobs. The number employed by the federal government declined by 7,000 to 2.8 million, state governments gained 2,000 for a total of 5.1 million and local governments gained 31,000 to reach a total of 14.4 million. Since February 2010, the employment low point, private employers have added 18,562,000 jobs as government has lost 118,000 (Figure 3).

In February, service industries expanded by 213,000 as goods-producing industries, driven mainly by construction and manufacturing, expanded by 100,000. This continues to be good news for steel demand as both steel consuming sectors have done well in the last seven months, during which time construction has added 239,000 and manufacturing 190,000 jobs. Since February 2010, service industries have added 15,571,000 and goods-producing 2,873,000 positions. This is part of the reason why wage growth has been slow since the recession as service industries on average pay less than goods-producing industries such as manufacturing.

Table 1 shows that primary metals gained 3,700 jobs in February, and in the last 12 months on a percentage basis was up by more than twice that of total manufacturing. Motor vehicles and parts industries gained 6,200 jobs in February, which was the best result since August last year. Transportation equipment gained 8,200 jobs. Trucking gained 5,600 jobs in February and in the last 12 months was up by 1.3 percent. Note, the subcomponents of both manufacturing and construction shown in Table 1 don’t add up to the total because we have only included those with the most relevance to the steel industry.

Construction was reported to have gained 61,000 jobs in February, the best result since February 2006, and is up by 3.7 percent in the last 12 months. Construction has added 1,673,000 jobs and manufacturing 1,161,000 since the recessionary employment low point in February 2010 (Figure 4). Construction has leapt ahead of manufacturing as a job creator, presumably because growth of construction productivity is very low in contrast to manufacturing where it has been historically high. We may have to rethink that, however. BLS estimates of construction productivity show growth over the same period (2007-2016) for all four construction segments. Productivity increased at an average rate of 5.3 percent for industrial building construction; 2.9 percent for multifamily houses; 1.1 percent for single-family; and 0.6 percent for highways, streets and bridges. According to the Associated General Contractors of America (AGC), 78 percent of construction firms are reporting difficulty in finding qualified labor. The jobless rate among experienced construction workers is at a record low, and job openings in the construction industry have neared pre-housing bubble peaks over the past two years.

The official unemployment rate, U3, reported in the BLS Household survey (see explanation below) came in at 4.1 percent, which was unchanged since October but down from 4.8 percent in January 2017. This number doesn’t account for those who have stopped looking. The more comprehensive U6 unemployment rate declined from 9.2 percent in January last year to 8.2 percent in this latest report, which was unchanged from January (Figure 5). U6 includes individuals working part time who desire full-time work and those who want to work but are so discouraged they have stopped looking. The differential between these rates was usually less than 4 percent before the recession; in February it was 4.1 percent.

The employment participation rate is calculated by dividing the number of people actively participating in the labor force by the total number of people eligible to participate. This measure was 63.0 percent in February, which was up from 62.7 percent in each month October through January. Another gauge is the number employed as a percentage of the population, which we think is more definitive. In February, the employment-to-population ratio was 60.4 percent, up from 59.7 percent in January 2017 and from 59.5 percent in January 2015. The employment-to-population ratio has made progress for the last four years, but the labor force participation rate has been stalled for two years. Figure 6 shows both measures on one graph.

In the 38 months since and including January 2015, there has been an increase of 7,811,000 full-time and 42,000 part-time jobs. Figure 7 shows the rolling 12-month total change in both part-time and full-time employment. This data comes from the household survey and part-time is defined as less than 35 hours per week. Because the full-time/part-time data comes from the household survey and the headline job creation number comes from the establishment survey, the two cannot be compared in any given month. To overcome the volatility in the part-time numbers, we must look at longer time periods than a month or even a quarter, which is why we look at a rolling 12 months for the full-time and part-time employment picture shown in Figure 7.

The job openings report known as JOLTS is reported on about the 10th of the month by the Federal Reserve and is over a month in arrears. Figure 8 shows the history of unfilled job openings through December when openings stood at 5,811,000, down from the all-time high of 6,116,000 last June. There has been an improving trend since mid-2009.

Initial claims for unemployment insurance, reported weekly by the Department of Labor, flattened in 2017 except for the hurricane-driven spike. New claims are at the lowest level since 1969. In the week ending March 3, initial claims were 231,000 with a four-week moving average of 222,500 claims. This marks the longest streak since 1973 of initial claims below 300,000 (Figure 9).

Another piece of the employment puzzle is the Challenger report, which measures monthly job cuts (Figure 10). This data also tends to be quite erratic; therefore, we again examine a rolling 12 months and can see that job cuts decreased for most of 2016 and continued their downward trend in 2017.

SMU Comment: Rising employment and wages are the basis of GDP growth because personal consumption accounts for almost 70 percent of GDP. Steel consumption is related to GDP; therefore, we need to be aware of changes to the employment picture. As we enter 2018, the employment situation is very good, job openings are close to an all-time high and new claims for unemployment are at a 44-year low. Manufacturing employment is 1.8 percent higher than this time last year and construction is up 3.7 percent. The employment situation has been described as “full” by some analysts. February was the 87th consecutive month of job growth. If as reported there is a shortage of qualified employees, we can expect an increase in wage-driven inflation soon. Employment growth in manufacturing and construction are signposts for steel sales activity. 2018 is starting at a very strong pace.

Explanation: On the first Friday of each month, the Bureau of Labor Statistics releases the employment data for the previous month. Data is available at www.bls.gov. The BLS reports on the results of two surveys. The Establishment survey reports the actual number employed by industry. The Household survey reports on the unemployment rate, participation rate, earnings, average workweek, the breakout into full-time and part-time workers and lots more details describing the age breakdown of the unemployed, reasons for and duration of unemployment. At Steel Market Update, we track the job creation numbers by many different categories. The BLS database is a reality check for other economic data streams such as manufacturing and construction. We include the net job creation figures for those two sectors in our “Key Indicators” report. It is easy to drill down into the BLS database to obtain employment data for many subsectors of the economy. For example, among hundreds of sub-indexes are truck transportation, auto production and primary metals production. The important point about all these data streams is in which direction they are headed. Whenever possible, we try to track three separate data sources for a given steel-related sector of the economy. We believe this gives a reasonable picture of market direction. The BLS data is one of the most important sources of fine-grained economic data that we use in our analyses. The states also collect their own employment numbers independently of the BLS. The compiled state data compares well with the federal data. Every three months, SMU examines the state data and provides a regional report, which indicates strength or weakness on a geographic basis. Reports by individual state can be produced on request.