We don’t want to get too carried away but February’s NFP report continued the trend of a slowly improving employment market in the US. Non-farm payrolls grew a seasonally adjusted 192k and positive revisions to December (+31k) and January (+27k) added a further 58k to total payrolls. This is a decent number but you need to see at least this much job creation and better on a sustained basis to show significant improvement in labor market conditions. Given weather issues, you might want to add January and February together and take an average, by that metric we have monthly gains of about 127k, not what you’d call strong but you also need to consider that the BLS could be understating job growth in the same way they understated job losses during the recession. With weather issues out of the way March will possibly be a better indicator.
Unlike the previous two months, the household survey and the establishment (non-farm) survey line up quite well. The household survey showed 250k new jobs added, with an additional 60k coming back into the labor force, thus netting off those two numbers gives a reduction in unemployment of -190k and with a constant participation rate of 64.2%, a 0.1% decline in the unemployment rate. This is more in the realm of normalcy as opposed to the two back to back large drops in the unemployment rate in the prior two months helped along by a falling participation rate.
I’m going to give up predicting a tick back up in the unemployment rate predicated on a rising participation rate until we actually see evidence of it. However if the participation rate has bottomed here, expect declines in the unemployment rate to be more like the trickling kind evident in this months data.
More than three years since the peak in employment and we are a long way from getting back to the peak. However, rather than bouncing along the bottom, the black line in the above chart is starting to get a slightly steeper slope about it. All in all the trend is one of incremental improvement, however it would be premature to give the all clear just yet.