Economic Update—March 7, 2014
By Steve Scranton, SVP, CFA
Chief Investment Officer
The much awaited jobs report for February was released by the Bureau of Labor Statistics (BLS) and the debate rages on as to how much of an impact weather had on the results. The BLS reported that the number of jobs added in February was 175,000. This was better than the census forecast of 149,000. The BLS also made revisions to the past two months data which resulted in a total of 25,000 more jobs being added than what was originally reported.
The BLS did provide limited information about the impact of the severe weather. The most important information that they provided was that, unless someone was not paid for the full week of the survey, they would not be counted as unemployed. Instead, the average work week would drop due to people not working the full week. This was confirmed when we look behind the headline news. The data shows that a record 6.9 million workers worked less than a full week during the survey period. Within that number, 601,000 workers were not at work due to weather. The net result is that the average workweek fell from 34.3 hours in January to 34.2 hours in February.
Even though the nation added more jobs than expected, the unemployment rate rose from 6.6% to 6.7%. This was due to a rise in the number of people entering the labor force and not able to find work. The labor force rose by 264,000 people in February and the number of unemployed rose by 223,000. The labor force participation rate remained steady at 63.0%, unchanged from January.
From an educational attainment perspective, the data continued to show the benefits of a college education when it comes to finding a job. The data does not speak to whether the quality of jobs that college grads are obtaining meets the careers desired. It also does not reveal whether college grads are taking jobs that normally would have gone to applicants with lesser education.
|Educational Attainment||January Unemployment||February Unemployment Rate|
|Less than High School||9.6%||9.8%|
|High School Graduate||6.5%||6.4%|
|Some College or 2 Year Degree||6.0%||6.2%|
|Bachelor’s Degree or Higher||3.2%||3.4%|
Looking at the unemployment rate by age group shows the continued challenges faced by the youth of America.
|Age Group||January Unemployment Rate||February Unemployment Rate|
|55 and over||4.6%||4.7%|
The alternative measures of unemployment showed mixed results with some measures increasing while others declined.
|U3 (Official unemployment rate)||6.6%||6.7%|
|U4 (U3 plus discouraged workers)||7.1%||7.2%|
|U5( U4 plus marginally attached workers)||8.1%||8.1%|
|U6 (U5 plus involuntary part time workers)||12.7%||12.6%|
For the long‐term unemployed, the good news from last month was completely reversed for February. The average duration for the long‐term unemployed rose from 35.4 weeks to 37.1 weeks. This is the same level that existed in December. The percent of the unemployed who have been unemployed for longer than 26 weeks rose from 35.8% to 37.0%.
The news on the salary front continued to be positive as average hourly earnings rose by.4%. Average hourly earnings rose 2.2% on a year‐over‐year basis. With the official inflation rate at 1.6%, workers were able to stay slightly ahead of the inflation rate. Overtime declined from 3.4 hours to 3.3 hours.
Analyzing the data shows the following breakdown of where jobs were created:
|Mining & Logging||1,000|
|Transportation & Warehouse||(3,600)|
|Professional & Business Services||79,000|
|Education & Healthcare||33,000|
|Leisure & Hospitality||25,000|
Today’s employment report was a respectable report and clearly a report that should not cause the Federal Reserve to change their strategy of gradually reducing the Quantitative Easing program while continuing to hold short‐term interest rates stable for an extended period of time.