The Employment Release And Business Cycle Indicators As Of 5 March

Summary

• The positive surprise in nonfarm payroll (NFP) employment — 379K vs Bloomberg consensus of 182K — was good news.
• NFP is 9.5 million lower (i.e., 6.2% lower) than the NBER peak in February 2020.
• Employment in leisure and hospitality, specifically food services and drinking establishments, led the way in increasing overall NFP employment.

Editor's note: This article was originally published on March 5, 2021 by Menzie Chinn here.

The positive surprise in nonfarm payroll (NFP) employment — 379K vs Bloomberg consensus of 182K — was good news. However, it's important to place this in context. NFP is 9.5 million lower (i.e., 6.2% lower) than the NBER peak in February 2020. In the context of key macro indicators followed by the NBER Business Cycle Dating Committee:

Figure 1: Nonfarm payroll employment (dark blue), Bloomberg consensus as of 3/3 for February nonfarm payroll employment (light blue square), industrial production (red), personal income excluding transfers in Ch.2012$ (green), manufacturing and trade sales in Ch.2012$ (black), consumption in Ch.2012$ (light blue), and monthly GDP in Ch.2012$ (pink), all log normalized to 2020M02=0. Source: BLS, Federal Reserve, BEA, via FRED, IHS Markit (nee Macroeconomic Advisers) (3/1/2021 release), NBER, and author's calculations.

Notice that while the 375K number seems large relative to 182K, this increase still looks small relative to the gap between where we were in February, and where we are today. This can be seen also in the private nonfarm series:

Figure 2: Private nonfarm payroll employment - BLS (blue), Bloomberg consensus as of 3/3 (teal square), private nonfarm payroll employment - ADP (red). Source: BLS, ADP, Bloomberg, and author's calculations.

Employment in leisure and hospitality, specifically food services and drinking establishments, led the way in increasing overall NFP employment. Figure 3 shows the change attributable to food services and drinking establishments, vs. all else.

Figure 3: Change in employment in food services and drinking establishments (brown), and in rest of nonfarm payroll employment (green), in 000's, s.a. Source: BLS, and author's calculations.

That being said, food services and drinking establishment employment is down 2 million (16.4%) relative to February 2020. In contrast, manufacturing is down only 0.56 million (4.4%). The two sector recovery (goods faster than high-contact services) persists.

As for the household survey numbers, don't forget that the official unemployment rate figure (which dropped to 6.2%) is not particularly informative. See Furman and Powell for a discussion; their estimate of the true rate is around 8.2% for February.

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.