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Don't Be Fooled By The February Top Line Jobs Number. The Economy Isn't That Good

J.G. Collins profile picture
J.G. Collins
2.67K Followers

Summary

  • While the topline jobs number printed well above the consensus, 94% of February jobs were created in the low-wage Hospitality Sector.
  • Fed Chair Powell made it clear this week he will not address rapidly accelerating longer-term interest rates.  At the same time, home prices in urban centers are declining.
  • How this dual dynamic of falling prices but rising rates will affect monthly mortgage payments is unknown, but banks will benefit while sellers may be caught in a "short sale".
  • We anticipate a volatile market as these dynamics play out.
  • Declining 3-month and 6-month average jobs, and jobs creation nearly exclusively in low-wage sectors, show the economy is more languid than many assume.

New York (March 5) - The February jobs report printed with 379,000 jobs, well above the consensus estimate of 182,000 jobs that the markets expected.

Revisions for December were down by 79,000, from 227,000 lost to 306,000 lost. The change for January was revised up by 117,000, from +49,000 to +166,000; thus the net change for the two prior months is 38,000 more jobs than were previously reported. Monthly, 3-month and 6-month average jobs printed as follows, with generally downward-sloping average jobs data:

Average JobsSource: The Stuyvesant Square Consultancy from today’s jobs report and historic data.

The seasonally adjusted unemployment rate in February fell to 6.2% from 6.3% in January, but is still 2.7 percentage points worse than the comparable month in 2020. But the lower unemployment rate also needs to be considered in light of the decline in the labor participation rate. The participation rate in February 2020, was 190 bps higher at 63.3%. The workforce decreased by 50,000 from January to February and is 4,237,000 fewer than in January 2020.

The seasonally adjusted U-6 Unemployment, at 11.1%, down 60 bps from last month's 11.7%, but still 4.1 percentage points higher than February 2020.

Nominal year-on-year average weekly wages increased by 5.87%, at a rate nearly three and a half times the rate of inflation, assuming the Trimmed Mean January PCE inflation rate of 1.68%. Month-on-month, nominal average weekly wages decreased by about $6.56. Average weekly hours were down slightly by 3/10th of an hour, month-on-month. Hours were up 2/10ths of an hour year-on-year, from February 2020.

Analysis: Details and Outlook

The pandemic shut down what had been a mostly optimistic economy. We are hopeful that the vaccination program – with about 25% of the population currently vaccinated - will eventually bring about herd immunity during or after this coming summer. Nevertheless, the variants

This article was written by

J.G. Collins profile picture
2.67K Followers
Before establishing The Stuyvesant Square Consultancy, J.G. Collins spent some 30 years building a career in executive and consulting financial roles, with a particular emphasis in business taxation. His experience spans work for Fortune 100 companies, one of the former “Big Eight” international accounting firms, and client service for large middle-market public accounting firms. He has advised domestic and foreign clients in the tax-efficient structuring of legal entities, effective tax rate planning, mergers and acquisitions, corporate reorganizations, treasury operations, financial instruments, international taxation, tax accounting under GAAP, state and local taxation, and sales and miscellaneous taxes. He has managed countless federal and state tax audits to successful resolutions for clients. His experience spans a diverse array of industries, including private equity, motion pictures and music entertainment, fashion, real estate, publishing, technology development, retail, and oil and gas. Mr. Collins conceived and branded the specialty industry entertainment practice of one of the nation’s leading accounting firms and oversaw the business tax marketing program for business enterprises of another large regional firm. Mr. Collins’ marketing collateral and published articles have been extraordinarily well received because of his ability to present intricate and complex aspects of tax, business, policy, and politics in clear, concise, easily understandable prose devoid of jargon and irrelevant detail. An astute, data-driven observer of business, politics and economics, Mr. Collins has advised political candidates and public officials on campaign, political and policy matters for more than two decades, and has twice been a delegate to his political party’s national quadrennial convention to nominate the American president. His expertise as a champion debater and orator in his student days, along with his savvy marketing expertise, has allowed Mr. Collins to coach private and public sector executives and candidates on public speaking, speech writing, message development and successful business presentations. Campaign collateral he developed for political campaigns has been used in university courses as an “excellent example of persuasive campaign advertising”. Mr. Collins holds degrees in Economics and Accounting from the Stern School of Business, New York University. His elective coursework included a number of political science courses, including International Politics, International Organizations, European Politics and other more basic political science courses.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

The views expressed, including the outcome of future events, are the opinions of the firm and its management only as of March 5, 2021, and will not be revised for events after this document was submitted to Seeking Alpha editors for publication. Statements herein do not represent, and should not be considered to be, investment advice. You should not use this article for that purpose. This article includes forward looking statements as to future events that may or may not develop as the writer opines. Before making any investment decision you should consult your own investment, business, legal, tax, and financial advisers. We associate with principals of Technometrica on survey work in some elements of our business.

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