The US jobs report was largely in line with expectations. February was the second consecutive month that the US
economy created more than 200k jobs. It is the first time since last
June and July. The 235k is just below the revised January 238k gain
(initially 227k).
The
unemployment rate ticked down to 4.7% from 4.8%, which is notable as the
participation rate increased to 63.0% from 62.9%. The underemployment rate slipped to 9.2% from 9.4%
and matched the cyclical low recorded at
the end of last year.
A shadow of
disappointment comes from average hourly earnings. They rose 0.2% compared with a
median guesstimate of 0.3%. However, the disappointment was blunted by
the upward revision to the January figure to 0.2% from 0.1%. This means that the year-over-year pace stayed
steady at the 2.8%, which is still the upper end of the recovery.
Of note, the
manufacturing sector added 28k jobs, matching last January's high, which was
the most since a spike in 2013. The January figure was revised to 11k from 5k. This will likely translate into greater
manufacturing output.
There is
nothing in the report that ought to cast doubt on the likelihood of a Fed hike
next week. The market has it discounted, and given the recent string of
commentary from Governors as well as regional presidents, not to move would be
destabilizing and undermine the credibility of the Federal Reserve.
Canada also
reported its February employment data. It is too good to be true.
Canada says it created 105k full-time
positions. To put this in context, it would be as if the US created one
million jobs in a month. It takes the US 5-6 months to do so. Canada says
that of the 105k new full-time positions, women accounted for 101k. Even
if this overstates the job creation in Canada, the
underlying trend is strong. And the unemployment rate slipped to
6.6%, matching the January 2015 cyclical low. Note that like the US (and
many other high income economies with improving labor markets) wage growth is
poor. The average hourly earnings increase in Canada stands at 1.3%
year--over-year (1.2% in January). It is less than half the US pace.
Lastly, recall
that the first quarter has been notoriously weaker than the other quarters
during the US recovery and expansion cycle. The first quarter this year is shaping up to be
consistent with that pattern. US growth appears to be tracking a little
below trend.
Disclaimer
Solid US Jobs Report in line with Expectations
Reviewed by Marc Chandler
on
March 10, 2017
Rating: