Non-farm payrolls fell a seasonally adjusted -36,000 in February according the BLS. January NFPs were revised from -20k to -26k whilst December was revised from -150k to -109k. Details of job losses and gains are detailed below.
Notably there was no net hiring by government agencies which had been touted because of the hiring of census workers. Nor were there any discernible large drops in payrolls because of weather effects. On the positive side, the diffusion index, which measures how widespread job losses or gains are, rose to 48.0 in February, the highest since March 2008. An index reading of over 50 would mean there is more hiring than firing going on.
Temporary help increased by 48k making it the fifth straight month of increase for temporary hiring. Historically temp hiring has been a precursor to full-time hiring coming out of a recession although that history only consists of 2 data points.
Since employment peaked in December 2007, the US economy has shed a massive 8.4 million jobs wiping out all the job growth of the previous cycle. In total the US economy has now shed 6.1% of its workforce since the peak just over 2 years ago.
Turning to the household survey, the data is looking increasingly more positive, employment rose 308k in February after a rise of 541k the previous month. The last time the household survey showed consecutive monthly rise in excess of 300k was in February and March of 2006. The household data is notoriously volatile but the trend is encouraging.
The unemployment rate remained unchanged at 9.7% despite a significant increase in employment as 342k new entrants entered the workforce looking for jobs and thus increasing the participation rate.
After a long slow decline, the participation rate has risen for two consecutive months indicating a modicum of confidence returning to job seekers.
Less positive was the average work week falling to 33.1 hours from 33.3 hours in January. This was one metric pundits believe was affected by weather. If that was the case then we should expect this data point to bounce next month.
The chart above shows unemployment by duration broken into the four categories measured by the BLS. What is striking about the current cycle is the degree of long term unemployment. As a percentage of total unemployed over 40% have been unemployed for 27 weeks or more. The chart below demonstrates this more clearly by showing on average how long an individual remains unemployed, topping out at just over 30 weeks in January and only down marginally below 30 in the latest month.
Weather effects aside, the underlying data shows that net employment gains are not far away and according to the household data, they have already arrived. I would expect to see consistent net payroll additions to start probably from next month. What remains unclear is the magnitude of those gains. Early signs are that more people are starting to look for work. That’s a positive sign from a confidence perspective but will have the adverse effect of keeping the unemployment rate high for some time.
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