The Bureau of Labor Statistics (BLS) released the Employment Situation report for February and the results look good but are more mixed than they look. The establishment survey shows payroll employment increased by 236,000, a decent number, but once again private sector payrolls increased (by 246,000) while the government sector continued to shrink (a loss of 10,000). The estimate for December was revised up by 23,000 while January was revised down 38,000, for a net loss of 15,000.
The household survey shows the unemployment rate dropped two tenths from 7.9% to 7.7%, but the decline was roughly a 60-40 split between people finding jobs and dropping out of the labor force.
The report was more unambiguously positive for the home building sector, adding 19,000 jobs in February and 56,000 since October with a four month string of 10,000+ gains.
So overall the payroll gains are bouncing up and down in a way that raises or lowers the monthly average depending on how far back you look and the unemployment rate in “trending” downward at too slow a pace and owes too much to declines in the labor force.
This mixed labor market report reflects other mixed signals in the economic data of late. On the negative side, fourth quarter GDP growth (+0.1%) was much weaker than both third quarter growth (3.1%) and what forecasters expected. On the positive side GDP growth is expected to rebound in the first quarter based on the transitory nature of the fourth quarter weakness (federal defense spending and inventory investment).
Also on the positive side, the Federal Reserve reported that household networth posted strong gains in the fourth quarter. Unfortunately now that house prices have stabilized (and begun to move up modestly) gains in household networth mainly reflect gains (and losses) in the stock market, and these gains are far less likely (than housing wealth gains) to underpin a strong rebound in consumer spending and more robust GDP growth.
So the employment report has some strengths and weaknesses and reflects a recovery treading water. Our forecast anticipates an acceleration in economic and labor market recovery as 2013 unfolds and today’s report shows we’re not quite there yet.