The Bureau of Labor Statistics’ employment report found robust economic growth continued in February. Employers added 295,000 net new jobs while unemployment dropped to 5.5 percent. Employment expanded across many industries while wage growth remained moderate.
The household survey reported the unemployment rate dropped 0.2 percentage points. This largely happened because 354,000 Americans left the labor market. However, demographic changes – principally retiring Baby Boomers – explained most of the February drop in labor force participation.
The participation rate of 25-54 year olds remained unchanged, while their unemployment rate dropped 0.2 points to 4.6 percent. The job market continued to improve for Americans looking for work.
Employers added 295,000 net new jobs while unemployment dropped to 5.5 percent.
The payroll survey found robust job growth across many industries. Leisure and hospitality (+66,000), professional and business services (+51,000), retail trade (+32,000) and health care (+24,000) showed the largest gains. Government payrolls expanded slightly (+7,000). Employment in the mining sector dropped (-8,000) – largely driven by the drop in energy prices reducing demand for oil extraction workers.
Other figures in the payroll survey gave more muted cause for optimism. Revisions to the January survey showed employers created 18,000 fewer jobs than previously estimated. Average workweeks remained flat at 34.6 hours a week for the fifth straight month. Average hourly earnings rose just 3 cents to $24.78/hour. Over the past year nominal hourly earnings have risen 2.0 percent.
Many economic commentators have pointed out that wage growth has remained low over the past year, even though hiring has picked up and unemployment has fallen. They view this as a puzzling disconnect – greater demand for labor should raise wages as well as the number of workers hired. However, the hiring gains may in part reflect increased labor supply – not just increased demand. Increased labor supply increases employment while putting downward pressure on wages. Economists need to do more research to determine whether supply or demand changes have driven the recent hiring gains.
On the whole the economy continued to grow at a healthy pace in February.
