March 4, 2016

February 2016 Jobs Report

Unemployment Rate: 4.9 percent

The Department of Labor reported an unemployment rate of 4.9 percent for February, unchanged from last month. It reported an increase of 242,000 nonfarm jobs in February. Today’s job growth figure exceeded analysts’ job growth prediction of 200,000. Employment for December was revised up from 262,000 to 271,000 jobs created; and January was revised up from 151,000 to 172,000.

Unemployment in February among those ages 16-19 was 15.6 percent, down 0.4 percent from the previous month. Among those 20-24, the unemployment rate was 8.6 percent, up 0.4 percentage points from January. For African-Americans, the unemployment rate was 8.8 percent, unchanged from the prior month.

The number of long-term unemployed, those unemployed for 27 weeks or more, was 2.2 million. They account for 27.7 percent of the unemployed, up from 26.9 percent in the prior month and down from 30.8 percent a year ago.

The “real” unemployment or U-6 rate is 9.7 percent, down 0.2 percent. This is the total percentage of unemployed and underemployed workers.

The “real” number of unemployed Americans is 15.6 million. These are people who are unemployed (7.8 million), want work but have stopped searching for a job (1.8 million), or are working part time because they cannot find full time employment (6.0 million).

While the recession ended nearly seven years ago, unemployment rates in most states remain higher than their average annual rate in 2007. The start of the recession was pegged to December 2007, and it ended in June 2009. In 2015, unemployment rates in just 14 states had returned to or fallen below their 2007 averages: Arkansas, Iowa, Kansas, Kentucky, Maine, Michigan, Minnesota, Missouri, Nebraska, New Hampshire, North Dakota, Ohio, Vermont, and Wisconsin.

In February, employment grew by 57,000 in health care and social assistance; 55,000 in retail trade; 40,000 in food services and drinking places; and 19,000 in construction. Employment in mining and logging decreased by 18,000 last month, and employment in manufacturing fell by 16,000 in February.

The labor force participation rate is 62.9 percent, up 0.2 from last month and remaining near the lowest level in 38 years. The persistently low labor force participation rate shows that millions of Americans are staying on the sidelines. Since April 2014, the participation rate had been stuck in a narrow range of 62.4 and 62.9 percent. Prior to the recession, the rate stood at 66 percent.

If the labor force participation rate were the same as when President Obama took office, the unemployment rate would be 9.0 percent.

The share of American adults with jobs in February was 59.8 percent, up 0.2 percent from last month. This is nearly 4 percentage points below its pre-recession peak.

In December 2015, the Federal Reserve voted to raise its main interest rate by 0.25 percent. It was the first rate increase in almost 10 years. The Fed noted at the time that it anticipates that economic conditions will evolve in a way that will warrant only gradual increases in the federal funds rate. The Fed statement following its last meeting in January mirrored this position. The next meeting of the Federal Reserve is March 15-16.

In February, average hourly earnings for all employees on private nonfarm payrolls decreased by 3 cents to $25.35, following last month’s increase of 12 cents. Over the year, average hourly earnings have risen by 2.2 percent.

February was the 79^th straight month that year-over-year hourly wage growth has been at or below 2.5 percent. Prior to the recession, wage growth routinely exceeded three percent.

As noted in the Wall Street Journal on January 8, modest wage growth remains a concern. A tighter labor market should lead to higher wages and ultimately stoke consumer inflation. Without stronger wage gains, it will be difficult for inflation to move back toward the Fed’s 2 percent annual target.

Issue Tag: Labor

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