U.S. Employment: What You Need to Know

March 8, 2013 03:28 AM

Via a special arrangement with Informa Economics, Inc.

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.

U.S. nonfarm payrolls rise 236,000; Unemployment rate at 4-yr. low of 7.7%.

The numbers: Nonfarm payrolls rose 236,000 in February.

Expectations were for a rise of 160,000.

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Where did the increases come: First the private sector added 246,000 jobs while the government sector shed 10,000.

Overall job growth was seen in professional and business services, construction, and health care. Professional and business services added 73,000 jobs in February, while construction jobs rose 48,000. Since September, construction employment has risen by 151,000. Health care jobs increased 32,000.

Revisions: January was revised from +157,000 to +119,000 while December revised from +196,000 to +219,000

Unemployment declined to 7.7%.

Expectations were for a decline to 7.8%.

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The number of unemployed persons, at 12.0 million, also edged lower in February.

In February, the number of long-term unemployed (those jobless for 27 weeks or more) was about unchanged at 4.8 million. These individuals accounted for 40.2% of the unemployed.

The employment-population ratio held at 58.6% in February. The civilian labor force participation rate, at 63.5%, changed little.

Other data highlights:

The average workweek for all employees on private nonfarm payrolls edged up by 0.1 hour to 34.5 hours. The manufacturing workweek rose by 0.2 hour to 40.9 hours, and factory overtime edged up by 0.1 hour to 3.4 hours.

Average hourly earnings for all employees on private nonfarm payrolls rose by 4 cents to $23.82. Over the year, average hourly earnings have risen by 2.1%.

U-6 is viewed as a the broadest measure of unemployment (accounts for people looking for jobs and those stuck in part-time positions) dropped to 14.3% in February, from 14.4% a month ago.

PERSPECTIVE: The report obviously surprised to the upside with far more jobs added than expected. But the key is whether it will really shift thinking on the Federal Reserve or not. So far, that answer is likely "no" as while the decline in the unemployment rate was slightly bigger than expected, it still leaves it well above the Fed's goal of getting that number to 6.5% or under. But it will spawn more talk in the market ahead of the FOMC session on the timing of any Fed tempering of stimulus efforts.

Wages have risen faster than inflation over the past year with the 2.1% increase. Means workers are starting to get ahead of inflation in terms of what is in their pocketbook. But the payroll tax increase likely took care of the hourly earnings increase and then some that was seen in February.

The pace of jobs added in last four months picked up to an average of about 205,000 a month.
The January revision may be a little unsettling to the market since it dropped the January reading some 38,000. But a big number for Feb. takes some sting out of that trim.

Bond yields will climb as traders welcome the employment data. Already, the 10-year note yield has moved over 2% and that could continue if additional economic data comes in on the positive side like today's data.

But the U.S. dollar is also gaining ground, suggesting we could be getting back to a point where positive news for the U.S. economy is also positive news for the U.S. dollar.

Bottom line: The employment situation is continuing to mend and that will keep the issue of when the Fed will pull back or start to temper the rate of its stimulus efforts a major discussion point. But the Fed will need to see this turn into a true trend and get much closer to their 6.5% target before any actions are likely. This will now also keep a critical focus on the minutes of FOMC meetings and the post-meeting press briefings, with the focus on the level of discussion or dissent relative to Fed policies. And that likely hinges on what will constitute "substantial" improvement.

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