There was plenty of good news and a bit of bad news in the February jobs report.
On the one hand, the labor market continued its now years-long streak of robust monthly gains, and people who had previously opted out of the market were encouraged to look for jobs – and found them. On the other hand, wages, the major sticking point of the current jobs picture, took an unwanted step back.
US employers added 242,000 jobs last month, well above the 195,000 analysts were expecting and a huge bump from the 172,000 jobs added in January. The unemployment rate held steady at 4.9 percent. It was the 72nd straight month of positive jobs numbers, dating back to 2010. Healthcare, retail, and food service all saw big gains, making up for losses in the energy sector.
Additionally, the continued improvement of the employment picture is encouraging more potential workers who had been on the sidelines to jump back in and look for jobs. Labor force participation ticked up 0.2 percent last month, to 62.9 percent. Participation has increased 0.5 percent since September of last year. That the employment rate didn’t move even though participation went up is a particularly encouraging sign; it means that on the whole, those who started looking for jobs typically found them.
“This is the second consecutive month we’ve seen the labor force grow with the strong economy,” Michael Madowitz, an economist with the left-leaning Center for American Progress (CAP), said in an e-mailed statement.
Wages, however, remained the job market’s lingering dark spot. Hourly earnings ticked down 0.1 percent last month, a frustrating performance for those who have been waiting for years for wage inflation to pick up steam. Wages have increased 2.2 percent since a year ago but remain historically low. According to a CAP analysis released earlier this week, today’s 30-year-olds make the same amount on average as 30-year-olds did in 1984, despite the fact that they have higher education levels and work in a far more productive overall economy. They make approximately $1 less, before adjusting for inflation, than 30-year-olds a decade ago.
Economists are unsure whether depressed wages are the new normal, or if increased participation combined with a lower employment rate will finally accelerate wage growth.
“Although the unemployment rate held at an eight-year low of 4.9 percent, the current pace of job creation should continue to bring the jobless rate down in coming months if sustained, fuelling further wage inflation,” Markit economist Chris Williamson wrote in an e-mailed report. “However, this is where the uncertainty lies. Survey data have signaled a marked slowing in the pace of economic expansion so far this year, … [and] a marked slowing is normally a precursor to a slackening in the rate of job creation.”
Indeed, February’s report comes during a relatively tumultuous time for the global economy and financial markets. Weakness in energy markets have rippled through world economies, and US stocks had a rocky start to 2016. Those headwinds could begin to affect workers more as the year wears on. “Our view remains that declining corporate profit margins will prompt aggressive cost-cutting and thus a slower trend for nonfarm payroll growth (most notably later this year and into 2017), which in turn will lead to a slower trend for consumer spending growth,” MFR, Inc. economist Joshua Shapiro wrote in an e-mailed analysis.