Employment Feb 2023: Forcefully Ambiguous, Definitively Mixed
February brings another strong jobs number to the labor market debate but not enough to change the inflation story.
The certainty of questions and confusion...
The payroll adds came in well above expectations with minor revisions to the big boom of January, so we still see Feb 2023 (+311K) as a hot number relative to what the Fed needs to see.
The tendency to look at the metric that helps your case was somewhat in evidence in the financial cable chatter, and the wage inflation of 4.6% was spun by some as positive even though hourly earnings growth was up sequentially from 4.4% in Jan 2023 but lower than the late 2022 averages.
The ability to initially read the UST curve reaction was useless with all eyes on Silicon Valley Bank and handicapping the new focus on deposit flows and the revival of “hot money” funding fears for banks that don’t have the big banks’ power of so many “0.1% funding sources.”
The booming payroll number of January 2023 (see Jobs: The Human Wave Continues 2-3-23) and the frothy JOLTS numbers (see A Fresh JOLT but No Shock 3-8-23, JOLTS: More Bodies for More Jobs, Demand is Strong 2-1-23) started the year off with a lot of labor market anxiety around the impact on FOMC decisions. The fact that the claims number this past week got back above 200K was seen as reassuring (see Initial Claims: Historical Context on what 211K Means 3-9-23), but the wide angle view on that number is like this morning’s monthly number. They add up to very strong labor markets with a lot of pressure on employers to match up the supply and demand for bodies across a lot of industries.
The time series chart above highlights the event journey since 2009 as the post-crisis path for jobs recovery unfolded. It took a few years to get back to the pre-crisis payroll levels, but the growth has generally been impressive along the way with a radical departure during the COVID crisis. This latest round of job growth will someday get a box in the chart that says “inflation spike” and “major UST shift” unless we can also fit “since Volcker” in the box. In other words, this is a very unusual time of high US and global inflation.
The employment trend line sees a record high total payroll count with the +311K adding to a 155.35 million nonfarm employment number. That falls in a line with the “Mo Bodies, Mo Money” school of economic growth. Even if the per capita purchasing power debate is justified, that is being trumped by “more capitas” on payroll and more getting wage hikes.
The Services sector and lower tier wage ranks led the numbers as usual (e.g., Leisure, Retail). That said, the breadth of growth was still impressive in industry mix with the notable exception of Manufacturing, which declined slightly. Manufacturing is a very important bellwether that punches above its jobs weight class in multiplier effects and economic and political significance. That will be one to watch closely in coming weeks.
The above chart runs back across the cycles and the highs and lows. The unemployment rate ticked higher to 3.6% in Feb 2023 from 3.4% in Jan 2023 (the lowest in over 50 years) despite the beat on the payroll adds line. That is a function of the workforce numbers. The theory is usually that higher wages bring out more workers or that a better job market increases the civilian labor force (rose by 419K in Feb from Jan 2023). That is consistent with the theories.