Title: Anticipating February’s Employment Report: A Look Beyond January’s Jaw-Dropping Job Gains
The upcoming jobs report for February is expected to reveal employment gains that may not reach the impressive heights of January’s record-breaking 353,000 new jobs. According to estimates from FactSet, US employers are projected to have added around 200,000 jobs last month. Despite this seemingly smaller number, the potential employment growth for February would still represent a significant addition to the workforce and continue an unprecedented period of labor market expansion.
January’s remarkable job gains were influenced by several factors, including weather conditions that affected industries sensitive to climate and seasonal adjustment factors. Economists believe that February’s report could provide a clearer understanding of the current employment situation since the previous few reports were subject to some volatility due to striking workers and seasonal fluctuations.
October and November’s jobs reports experienced some turbulence due to labor disputes in the auto industry, writing sectors, and acting industries. December and January’s reports may have overstated growth as fewer seasonal workers were laid off compared to previous years, according to Julia Pollak, the chief economist at ZipRecruiter.
Even though monthly job gains are expected to cool down in 2024 compared to 2021’s average of 254,667 jobs and the roaring post-pandemic recovery years of 2022 and 2021 with an average of 377,333 and 603,750 jobs per month, respectively, the projected employment growth for February would still be above historical averages and the neutral rate of job growth needed to keep up with population growth.
If the estimated job gains materialize and the unemployment rate remains at 3.7%, it would mark the fifth-longest labor market expansion on record and prolong a streak of sub-4% unemployment that hasn’t been observed since the Nixon administration.
Ron Hetrick, senior economist for labor analytics firm Lightcast, commented on the current economic situation: “Compared to 2021 and 2022, the party has ended, and now people are feeling the hangover. People think things are terrible now, but looking at the economy as a whole, we’re not seeing that in the data — things are fantastic.”
Beyond the headline numbers, several key metrics will be closely monitored in Friday’s report. Some of these include wage growth, average workweek, and where the jobs are being added, as well as labor force participation rates.
Wage growth: January’s average hourly earnings rose by 0.6% from December and 4.5% annually, with a decrease in hours worked contributing to the increase. Economists anticipate that wage growth will moderate slightly but remain above the Federal Reserve’s preferred rate of 3.5%.
Average workweek: The measure of average hours worked in a week typically remains stable or changes by only 0.1 hours per month. However, the sudden drop of 0.2 hours in January to 34.1 hours was likely due to frigid temperatures and snow affecting industries sensitive to weather conditions. A shrinking average workweek could be a sign that economic activity is weakening.
Where the jobs are and labor force participation: The lion’s share of employment gains during the past year have been concentrated in the healthcare, leisure, and hospitality industries, as well as government. January’s report showed that gains were distributed across a wider range of industries, indicating whether this was a statistical anomaly or a trend.
The labor force participation rate, which measures the active workforce and those seeking employment as a percentage of the population, was unchanged in January at 62.5%. The participation rate has been declining since peaking at 67.3% in early 2000 and falling to 63.3% before the pandemic. Economists are closely watching labor force participation rates, which have not returned to pre-pandemic levels and contribute to an imbalance between worker supply and demand.
Recent economic data supports the notion that the US labor market is cooling but remains robust, with private-sector employers adding an estimated 140,000 jobs in February according to ADP’s report and the Job Openings and Labor Turnover Survey (JOLTS) showing that hiring activity, quits, and layoffs all decreased in January. However, the number of job openings remains significantly above pre-pandemic averages, indicating ongoing labor market strength.
Despite this optimistic outlook, layoffs have been persistently high, with US-based companies announcing 84,638 job cuts in February – a 3% increase from January and up 9% from the same period last year. This represents the second-highest January-to-February total since 2009, according to Challenger, Gray & Christmas.
Reports of localized layoffs indicate some pockets of weakness in the labor market, but overall initial and continued jobless claims remain low, suggesting that layoff activity remains subdued.
