HFF Analysis of the February 2019 BLS Employment Report

Monday, March 11, 2019

HFF is pleased to report on the latest employment expansion statistics from February 2019. 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 lower-than-expected 20,000 jobs in February. Figures were revised upward to 311,000 in January and upward to 227,000 in December, a net revision of 12,000. Payroll creation has averaged around 201,000 since October 2010, marking the 101th month of consecutive growth. The period of monthly gains is around four and a half years longer than the prior longest streak from 1986 to 1990.

Unemployment fell slightly to 3.8 percent from four percent in January 2019, supporting analyst’s theory that the rise seen in January was mostly due to the government shutdown. Unemployment has now been below five percent for 29 consecutive months and at or below four percent for 12 consecutive months.

Wage growth came in strong at 3.4 percent, the highest rate seen since 2009. The labor participation rate remained at 63.2 percent, its highest level since 2013.

Some analyst’s explanations for the particularly low job growth and higher wage growth seen in February include:

  • During the government shutdown in January, more temporary work was sought by those effected. This led to higher employment growth in January and lower employment growth in February.
  • Weather related issues resulted in less work hours than usual for those employed hourly. This would bring up the average wage, contributing to the high wage growth seen this month. 

Average Monthly Payroll Creation Steady

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

 

 

Job Growth Beats Expectations

The U.S. created 2.15 million jobs in 2017 and 2.67 in 2018.* The last six years’ job growth is on par with the expansionary period from 1992 to 1995.

 

 

Job Growth Positive in Almost All Major Job Sectors

In 2018, the U.S. created 2.67 million jobs, and in 2017, 2.15 million jobs; however, in both years, around 40 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 537,000 jobs, a year-over-year growth rate of 2.6 percent, above the five-year average growth rate of 2.5 percent. Temporary Staffing accounted for 67,000 (approximately 12 percent) of these positions.

Education and Health Services, which has performed well throughout the downturn being a recession-resistant industry, expanded by 499,000 jobs in the year ending February 2019. Construction added 223,000 jobs (up 3.1 percent year over year) in the year ending February 2019. Comparing this, construction added 309,000 jobs (up 4.5 percent) in the year ending February 2018.

 

 

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. The Unemployment Rate fell to 3.8 percent in February 2019, marking the 29th consecutive month below five percent.

The Underemployment Rate fell to 7.3 percent in February 2019, a correction to last month’s rise, which many analysts say was a reflection of the government shutdown’s effect on businesses the government contracts with.

Fortunately, the longer trend for the Underemployment Rate has been a descent from a 2009 high of just over 17 percent. The spread between the two rates is at 350 bps and has, overall, been compressing gradually having reached a high of 740 bps in September of 2011.

 

 

Wage Growth

As the labor force approaches “full employment,” much attention has been cast to wage growth. The current year-over-year wage growth came in at 3.4 percent in the year ending February 2019, the highest rate seen since 2009. The past three recessions were preceded by a period of FOMC tightening, which aligns also with an average hourly earnings growth in excesses of four percent reflecting strong economic activity overall. 

 

*Revised numbers as of  January 2019.

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

Prepared by HFF Research Analysts Laura Bancroft and Morgan Allen and HFF Managing Director of Research Jimmy Hinton

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