Nonfarm Payrolls Reach Peak: 273K, 3.5% Unemployment

Friday, March 6, 2020

As we say quite often around here lately, these are not normal times. Because in normal times, today’s Employment Situation Report from the U.S. Bureau of Labor Statistics (BLS) of 273K new jobs created in the month of February would be cause for celebration, as would the Unemployment Rate coming down to 3.5%. These are extraordinarily strong figures 11 years into a robust bull market, especially considering expectations were for 165K new jobs created.

Revenues to the previous two months were also very impressive: January’s 225K originally reported also came in this morning at 273K, for a +48K upward revision, while December’s headline went up from 147K to 184K this morning. This brings the three-month moving average to 243K new jobs created per month — nearly 2 1/2 times the amount of new jobs needed to cover for retirees and others exiting the jobs market.

Healthcare grew the most, at 57K new positions filled in February, followed by Restaurants and Bars at 53K… let’s stop right there. Looking forward, Healthcare may well be expected to continue to gain large amounts of new jobs per month as the U.S. and the rest of the world continue to deal with the spreading coronavirus pandemic. But Restaurants and Bars — along with movie theaters, sporting events, cruise ships and airplane travel — must be expected to come down drastically in the months to come. For this reason, we feel the February BLS figures may represent a clear peak.

Government jobs rose 45K, based partly on new hires for the national census conducted every 10 years, as well as growth in state education positions. As far as Retail, it was down again last month, by 7000 jobs. Transportation lost 4000 positions in February.

Average Hourly Earnings came in as expected at +0.3%, which is consistently a bit weak for such a robust labor market. This amounts to a gain of 9 cents to an average of $28.52 per hour. Year over year, we’re up 3.0%, a tad lower than previous months’ reads. This again articulates our long-term narrative that, while jobs overall are clearly plentiful, the better-paying ones are not. Labor Force Participation kept pace at 63.7% — still under 2/3rds of a full workforce, while the U-6 (aka “real unemployment”) rose slightly to 7%, though still in historically very healthy territory.

All that said, pre-market futures are taking another big step down this morning, with the Dow off 787 points from Thursday’s close (which fell nearly 3.6% from Wednesday), the Nasdaq -315 points and the S&P 500 -102 points. For sure, we’d rather have a robust employment backdrop going into a global pandemic situation like what it appears we’re facing with the coronavirus. But it would be hard to reason for expectations of employment figures this strong in the months to come.

Mark Vickery
Senior Editor

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