The Employment Situation for February – Weather The Right Signals

The Bureau of Labor Statistics (BLS) released the Employment Situation report for February. The establishment survey showed payroll employment expanded by 175,000 in February and the prior two months were revised upward for a combined increase of 25,000. From the household survey, the unemployment rate reversed last month’s decline, rising back to 6.7% from 6.6% in January. The labor force expanded by 264,000, the number of employed persons increased by 42,000, and the number of unemployed persons rose by 223,000.

The return to more robust growth in February payrolls is a positive signal after the disappointing slowdown in December and January. Indicators from the household survey regarding missed work due to bad weather suggest that the February gain could have been larger absent winter storms during the month. These “missed” jobs could provide a boost to payroll growth in the March report.

The increase in the unemployment rate could be a blessing in disguise if it represents the beginning of more consistent growth in the labor force, drawing back discouraged workers who have given up the job search in recent years.

In any event the uptick in the unemployment rate will have no impact on the Federal Reserve’s pace of reductions in bond purchases. An expanding labor force will bolster the Fed’s confidence, rather than undermine it, that the recovery is proceeding, and the Fed will continue its measured reductions in the pace of bond buying at the upcoming March meeting.

Today’s report is not as strong as it might have been but still has plenty of positive signals.

3 Responses to The Employment Situation for February – Weather The Right Signals

  1. Charles J Ruma says:

    How could the unemployment report be good….when the number of unemployed increased by 233,000 workers? That is 233,000 potential buyers that do not have a job! And 42,000 job gains is not “solid job gains”… a real recovery.

    • Robert Denk says:


      I think we agree more than we disagree here, but a couple of technical points first.

      The establishment survey is generally considered a more reliable measure of job gains because it has a much larger sample size than the household survey. The establishment survey indicated 175,000 added to payrolls in February compared to 42,000 from the household survey. The 175,000 isn’t great compared to the roughly 200,000 we were averaging, but it is bouncing back from December and January which were bad months.

      The second point is that it is typical for the number of employed persons to shrink and the number of unemployed persons to swell during recessions, and this is typically reversed during recoveries, but the labor force keeps growing. What is conspicuous in this cycle is the pause in the growth of the labor force. A large part of why the unemployment rate has come down is not because the unemployed are finding jobs, but because they are dropping out of the labor force, making the decline in the unemployment rate a false indicator of improvement.

      My point in the blog post is that while an increase in the unemployment rate is typically a bad sign in the labor market, in this case drawing discouraged workers back into the labor force would be a good thing even if it does temporarily increase the unemployment rate. So the silver lining on the dark cloud of 233,000 additional unemployed is that at least they’re back in the labor force. This puts them that much closer to getting a job (and buying a house).

      So February job gains: 175,000 and discouraged workers are confident enough to start looking again. That’s why I conclude: “Today’s report is not as strong as it might have been but still has plenty of positive signals.”

  2. […] count since May 2008. Overall employment growth remains lackluster, with the economy creating only 175,000 jobs in February after disappointing reports in January and December. And recent Producer Price Index data show that in February softwood lumber prices rose 2.2%, OSB […]

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