HFF Analysis of the February 2018 BLS Employment Report

Monday, March 12, 2018

HFF is pleased to report on the latest employment expansion statistics from February 2018. Our research team analyzes trends and data to give readers a better view into the current state of the economy and how employment is being affected.

Employment Expansion

The U.S. added a higher-than-expected 313,000 jobs in February. This is the largest payroll increase since July 2016 and well above economists' expectations for the month. Figures were revised upward to 239,000 in January and 175,000 in December, a net upward revision of 54,000. Payroll creation has averaged 200,000 since October 2010, marking the 89th month of consecutive growth. The period of monthly gains is about three years longer than the prior longest streak from 1986 to 1990. Construction added 61,000 in February, the largest monthly increase in almost 11 years. The previous peak was a monthly gain of 80,000 construction jobs in March 2007.

The Unemployment Rate remained unchanged for the fifth straight month at 4.1 percent, the lowest level since December 2000. The Fed’s long‐term projection for the unemployment rate is currently between 4.4 and 4.7 percent. Wage growth cooled to 2.6 percent since last February following January’s revised down annual wage gain of 2.8 percent.

Average Monthly Payroll Creation Slowing

The current expansion cycle is similar to the 1991 to 2000 one and greater than the 2004 to 2007 expansionary period but only after a significantly delayed recapture of the nation’s previous employment peak.

Attractive Job Growth Cooling

The U.S. created 2.16 million jobs in 2016, the smallest gain for a calendar year since 2011. The last six-years’ job growth is on par with the expansionary period from 1992 to 1995.

In 2016, the U.S. created 2.16 million jobs, but nearly 32 percent of private‐sector job gains came from construction, manufacturing, retailers, hotels, restaurants and temporary help agencies, all typically low‐paying sectors. Professional Business Services, the industry sector most closely aligned with office using employment, experienced expansion of 386,000 jobs in the year ended February 2018.

Fortunately, Temporary Staffing only accounted for 18,000 (approximately five percent) of these positions. Temporary Staffing is slowing, however, implying hesitance in hiring the lowest-cost employees companies can find in tentative expansions. Education and Health Services, which has performed well throughout the downturn being a recession‐resistant industry, expanded by 678,000 jobs in the year ending February 2018.

Construction added 61,000 in the year ending February 2018, the largest monthly increase in almost 11 years.

Unemployment Rate

The Underemployment Rate augments the Unemployment Rate to include anyone marginally attached to the labor force that is either not employed or employed only part time. Fortunately, the Underemployment Rate has descending from a recent high of just over 17 percent; however, the spread between the two rates is near an all‐time high and shows no sign of rapid compression. 

The Unemployment Rate in February remained unchanged at 4.1 percent for the fifth month in a row, the lowest level since December 2000. The Underemployment Rate came in at 8.2 percent in February, a 10 basis point increase from the prior month.

Wage Growth

As the labor force approaches “full employment,” much attention has been cast to wage growth. The past three  recessions were preceded by a period of FOMC tightening. Average hourly earnings growth exceeded four percent in each of these periods as overall economic activity became reflected in strong wage growth. The current year-over-year percent wage growth registered at about 2.6 percent, 30 BPS below last month’s figure.

Sources: HFF Research, Bureau of Labor Statistics, Department of Labor, Bloomberg

Prepared by HFF Research Analysts Aziza RehmatullaMorgan Allen and Jimmy Hinton

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