If you’re an economic extremist in search of hard data to validate your outlook, today’s nonfarm payrolls update for February is a disappointment. That’s not necessarily a bad thing, but it’s not especially encouraging either. Private-sector jobs increased by a net 162,000 last month (seasonally adjusted), up a bit from January’s revised 142,000 advance. Last month’s gain beat expectations, including The Capital Spectator’s median forecast. But there’s nothing exciting here in terms of new evidence that the labor market’s about to break free of its sluggish behavior in recent months.
You can say that the mild improvement in growth for February represents progress relative to what we’ve seen since December. But compared with the 12 months through last November, today’s data suggests that the economy’s capacity to create jobs is impaired. It’s anyone’s guess if that’s going to change for the better. The basis for thinking that it will continues to rely on the weather narrative: the harsh winter bushwhacked the macro trend, we’re told, and so the economy’s downshift of late is only temporary.
Sticking to what we know for sure, there’s no doubt that the employment numbers are soft these days. In fact, the weakness is starting to infect the year-over-year comparison, albeit on the margins. For the first time since last April, private-sector jobs grew by less than 2% in annual terms through last month — 1.93%, to be exact, or slightly below the 2.0%-2.2% range that prevailed between May 2013 and January 2014.
Is the deceleration in the annual trend a cause for concern for the big-picture outlook for the US economy? Maybe, although there’s still no smoking gun with regards to hard data. The recent update of the US Economic Profile suggests that there’s a convincing bias for growth (a bias that remained intact when I updated the numbers earlier this week). Today’s payrolls report doesn’t change this view, although the release reminds us that modest/sluggish growth still dominates as the best-case estimate for the near term until the incoming numbers in the weeks ahead tell us otherwise.
Yes, a spring revival may be waiting in the wings. I’m inclined to agree that the trend will improve, if only because there’s still no clear sign of trouble across a broad spectrum of indicators. Nonetheless, we’re currently seeing some weakness in the growth trend, as today’s payrolls data shows. We won’t have a clear sign of what this means, if anything, until the post-winter numbers begin to roll in, starting next month.
For now, it’s fair to say that growth rolls on, albeit at a slower rate compared with recent history. There’s a decent case for arguing that the pace will perk up in the months to come. The consistent growth of jobs in the cyclically sensitive manufacturing sector since last fall, for instance, is an encouraging sign. But it’s also true that the case for optimism overall has been downgraded.