February 2016 Non-Farm Payrolls

This morning, at 5:30 am Pacific time, the Bureau of Labor Statistics (“BLS”) unveiled their latest reading on US job growth.  I was a bit surprised the ‘non-farm payroll’ numbers increased by 242,000.  I was expecting a smaller increase. The official ‘Unemployment Rate’ remained at 4.9%.  This data indicates the US economy remains on solid footing.

I’m certain you want to read the entire 39-page release yourself, so here’s the URL:

http://links.govdelivery.com/track?type=click&enid=ZWFzPTEmbXNpZD0mYXVpZD0mbWFpbGluZ2lkPTIwMTYwMzA0LjU2MDQ3OTMxJm1lc3NhZ2VpZD1NREItUFJELUJVTC0yMDE2MDMwNC41NjA0NzkzMSZkYXRhYmFzZWlkPTEwMDEmc2VyaWFsPTE2ODA2MzMzJmVtYWlsaWQ9VGVycnlAbGllYm1hbmdyb3VwLmNvbSZ1c2VyaWQ9VGVycnlAbGllYm1hbmdyb3VwLmNvbSZ0YXJnZXRpZD0mZmw9JmV4dHJhPU11bHRpdmFyaWF0ZUlkPSYmJg==&&&101&&&http://www.bls.gov/news.release/pdf/empsit.pdf

If not, here are a few high level comments:

‘Average hourly earnings for all employees’ declined slightly. By 3 cents to $25.35.

At first glance, I found this statement a bit confusing:

“In February, the unemployment rate held at 4.9 percent, and the number of unemployed persons, at 7.8 million, was unchanged.”

OK, how do we create 242,000 new jobs – fill those jobs – and the number of unemployed people remains unchanged? Huh? How is that possible?

Well, to figure that out, we have to did a bit deeper.   Let’s look at the charts on page 4 of the release.

It turns out that between January and February, two things happened: First, the population increased. Second, the ‘participation rate’ increased. Combined they increased the size of the ‘Civilian Labor Force’.

What’s that? Here’s the definition: “Civilian Labor Force is the sum of civilian employment and civilian unemployment. These individuals are civilians (not members of the Armed Services) who are age 16 years or older, and are not in institutions such as prisons, mental hospitals, or nursing homes.”

In February, the CLF increased by 555,000 people, which included a population increase of 180,000 folks (again, you have to be over 16 to be counted in this group.) The number of ‘Employed’ people increased by 530,000, resulting in the number of unemployed folks remaining fairly static near 7.8 million.

Said another way, during the month of February, the US population increased, and the number of people who wanted to work increased. 242,000 new jobs were created and almost twice that amount found new employment opportunities. At the same time, income growth is non-existent.  There appears to be NO inflation caused by wage increases.

– Terry Liebman