The February jobs report, the first of the new administration, greatly exceeded analyst expectations. Analysts forecasted 197,000 new jobs for the month and instead saw 235,000 new jobs added. January’s jobs number was also revised slightly to show 238,000 new jobs, a positive increase of 11,000. The unemployment rate slid back down to 4.7% after a slight uptick in January, while the labor force participation rate increased to 63% from 62.9% last month.
As we often see, most of the jobs created were in the private service-providing sector, a consistent trend since the U.S. economy shifted from predominantly production-based to services-based. However, this report also showed a large increase in the number of construction and manufacturing jobs created; growth in construction may be a result of record warmth in February, but it represents a significant development. Mining and logging continued to rebound alongside oil prices, and government also saw gains.
Average weekly hours remained at 34.4 while average hourly earnings increased to $26.09. This represents a 2.8% increase from February 2016, another indicator of the tightening labor market.
In a less positive development, external workforce employment growth was “underwhelming”, writes Andrew Braswell, CCWP, Senior Research Analyst at Staffing Industry Analysts. This month’s report brought downward revisions to December and January temporary employment numbers, for a total of 12,900 fewer jobs than initially reported. “That said,” he continued, “the longer-term picture continues to improve… and we maintain our expectation that new highs in this metric will be reached in 2017 as business confidence continues to improve.”
As expected, the odd drop in the employed population discussed last month was balanced by a huge jump of 447,000 in the Household report data for February.
Given the excellent jobs report, all eyes will be on the Federal Reserve meeting March 14-15. Market analysts are expecting action based on comments Chair Janet Yellen made to The Executives’ Club of Chicago in early March, “Indeed, at our meeting later this month, the committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the federal funds rate would likely be appropriate.” A rate increase will have follow-on effects in specific sectors such as housing, which could significantly impact the construction hiring that helped drive strong February job growth. We’ll be watching closely, as a rate hike represents a longer-term risk to job growth – even as the broader labor market remains strong.