Friday, August 01, 2014 - Jobs, Mainly

Jobs, Mainly

by Sinclair Noe

DOW – 69 = 16,493
SPX – 5 = 1925
NAS – 17 = 4352
10 YR YLD - .05 = 2.50%
OIL - .32 = 97.88
GOLD + 13.70 = 1295.20
SILV - .09 = 20.40

The first Friday of each month brings us what I consider one of the most important economic reports we can cover, the jobs report; and so we provide comprehensive (wonkish) coverage.

The economy added 209,000 net new jobs in July. The unemployment rate moved up to 6.2% from 6.1%. Even though the economy added jobs, more people joined the labor force, and that is why the unemployment rate moved higher. The 209,000 new jobs was below estimates of about 230,000. The report from June was revised from 288,000 to 298,000; the May report was revised from 224,000 to 229,000 for a net 15,000 in upward revisions.

Employment is up 2.57 million year over year. We have regained the jobs lost in the downturn, and total employment is 639,000 above the pre-recession peak. Total employment is up 9.35 million from the lows of the recession, and private employment is up almost 9.9 million from the lows; the difference reflects the job losses in government related jobs.

So far this year an average of 229,000 new jobs a month have been created. That’s a significantly higher pace than in 2010 when a mere 88,000 jobs a month on average were added. Since the start of the year the economy has added 1.6 million jobs.  At the current pace, the economy could add 2.75 million jobs this year, which would be the best year for total and private job growth since 1999.

This was the sixth month in a row with more than 200,000 jobs added, and that hasn’t happened since 1997. It was probably a bigger achievement 17 years ago, because the economy and the labor force was smaller back then, but the employment recovery has been chugging along through a first quarter that was frozen by the polar vortex and rebound in the second quarter. And the private sector has been adding jobs consistently since the first quarter of 2010.

The unemployment rate was up to 6.2%. The jobless rate can rise for both good reasons (more people looking for work) and bad reasons (fewer people having a job). This month, more people were looking for work. The Labor Force Participation Rate increased to 62.9% in July; this is a measure of how many people who are of working age are actually in the labor force and working or looking for work. The idea that the pool of labor is increasing is a positive; the idea is that some people who have been unemployed for a long time are now finding jobs. The trend in employment growth remains more than strong enough for the unemployment rate to keep trending down, even though the rate rose a tenth this month

Part of the decline in the participation rate was due to demographics; many older workers retired, whether they wanted to or not, while many younger workers stayed in school or returned to school. So, it’s helpful to look at people aged 25-54, in their prime working age; among this group, the participation rate declined slightly; this confirms that younger and older workers were jumping back into the labor pool.  Still, the employment to population rate, which measures the country’s population that reported having a job in July was unchanged at 59%, a number that was up only barely from its 58.7% level of a year ago.

There are still more than 3.1 million workers who have been unemployed more than half a year. And there are just over 7.5 million people working part-time for economic reasons. These workers are included in an alternate measure of unemployment known as the U-6, which includes unemployed and underutilized workers; U-6 increased from 12.1% to 12.2%.

Many people think the U-6 is a more accurate measure of the jobs market, but let’s dig a little deeper. There are 9.6 million people unemployed and actively looking for a job. There are more than 2 million people who have stopped looking for a job within the past year. When you start adding all the unemployed workers who want a job, plus involuntary part-time, plus discouraged workers, you come up with about 23 million people that could possibly move into the labor pool. There is still massive slack in the labor market, and it will take a long time to take up the slack. For now, it is a slow, steady slog.

Where is the job growth coming from? Professional and business services added 47,000 jobs. Retail employment gained 27,000 jobs. Manufacturing added 28,000 jobs last month but the sector has recovered only 30% of the jobs lost during the recession. Construction added 22,000 jobs. Leisure and hospitality gained 21,000. Education and health services added 17,000. Government added 11,000. State and local government employment is now up 151,000 from the bottom, but still nearly 600,000 below the peak. Federal government jobs have dropped by 22,000 since the start of the year. The loss of government jobs is one of the major factors in the slow jobs recovery. In previous downturns, government did not have layoffs, and sometimes increased hiring. In this downturn government jobs were cut in a wave of austerity measures.

Even though the economy has been adding jobs, it has not been enough to push a recovery in wages. In July, average hourly wages rose a penny to $24.45, a disappointing result after strong gains in June and May. In 23 of the past 24 months, the yearly increase in hourly pay has ranged from 1.9% to 2.2%, or about one-third less than usual during an economic recovery. The 12-month increase in wages as of July was just 2%; and inflation wiped out about three-fourths of that gain. There’s been no change since the start of 2014. While it might seem counterintuitive that wages are flat while jobs are being added, the likely reason is that there are a lot of poor paying jobs plus a few very good paying jobs. The average length of the workweek for private sector workers was unchanged at 34.5 hours.

Stronger than expected US growth figures on Wednesday showed second quarter GDP up 4% on an annualized basis, along with hawkish comments from US Federal Reserve board member Charles Plosser, it prompted fears that the central bank may increase the cost of borrowing sooner than expected. Today’s non-farm payroll numbers were just weak enough to ease concerns about possible tightening from the Fed, yet not so awful as to indicate a downturn. It still points to a job market and an economy that is improving, but there is no real wage pressure and nothing to indicate inflation is a concern.

We had a couple more economic reports today. The Institute for Supply Management said its index of national factory activity rose to 57.1 in July, the highest since April 2011, from 55.3 in June. A reading above 50 indicates expansion in the manufacturing sector.

The Thomson Reuters/University of Michigan's final July reading on the overall index on consumer sentiment came in at 81.8, down from the final June reading of 82.5. The surveyors report that consumers’ attention has been dominated by jobs and income growth.

For the week, the S&P 500 fell 2.7%, its biggest weekly percentage loss since the week ending June 1, 2012, while the Nasdaq fell 2.2%. The Dow ended down 2.8% for the week. The Dow's losses dragged it further into negative territory for the year. For the year-to-date, it is down 0.5%.

Markets have suffered a turbulent few days, hit by a combination of interest rate concerns and growing geopolitical worries. The violence in Gaza also added to the sense of events escalating out of control; a proposed 72 hour cease fire didn’t last one day. An Israeli soldier was captured, and it looks like violence will escalate over the weekend. The week saw Argentina defaulting for the second time in 12 years, while continuing tensions with Russia over the Ukraine led to the imposition of further sanctions which could hit businesses and put the brakes on global growth.

It was a big week for US economic activity, with jobs and GDP statistics and a Fed meeting, but it was European equity markets that took a real tumble. Portugal was a big loser, as Banco Espírito Santo reported the largest-ever loss for a Portuguese company, sending its shares spiraling and prompting probes into possible accounting fraud at the bank.

Portugal’s major stock index dropped 10% for the week. German stocks were hit following stepped up sanctions against Russia, a major supplier of natural gas to Germany; the DAX index slipped 4.5%. Greece, Austria, Spain, UK, and France all saw declines of 3% or more. The major Russian index dropped about 1%.

Europe posted its own jobs report. Eurozone unemployment dropped to 11.5%, which is absolutely horrible, but getting better. Meanwhile, the region continues to flirt with the prospect of deflation, with euro zone wide prices rising a scant 0.4% in July from the prior year. So, there is still plenty the ECB can do to stimulate the economy over there.

Meanwhile, Congress is calling a 5 week recess, an extended summer vacation, which even Europeans think is excessive. They managed to get a few things done before running away. They passed a $16 billion VA bill to help deal with extensive treatment delays and a recent record-keeping scandal. They cobbled together a patch for highway funding, just a temporary patch. This Congress has only managed to pass 142 bills into law, which puts the legislative branch on pace for its least productive session in modern history. And now they’re heading out for a 5 week vacation. Maybe we’ll get lucky and they won’t come back.

Thursday, July 03, 2014 - Jobs Report Thursday

Jobs Report Thursday

DOW + 92 = 17,068
SPX + 10 = 1985
NAS + 28 = 4485
10 YR YLD + .02 = 2.65%
OIL - .42 = 104.06
GOLD – 7.60 = 1320.60
SILV - .02 = 21.23

Record high closes for the Dow and the S&P 500.

The first Friday of each month is typically a big day for economic data because the Labor Department releases the nonfarm employment report. I have always considered this to be one of the most important economic reports because jobs make everything happen; it’s the stuff of work and production and a driver of capital, and sweat and blood. So, we spend extra time to really dig into the jobs report, which was released today because tomorrow is a holiday.

This was a very good jobs report. The economy added 288,000 net new jobs in June and the unemployment rate dropped from 6.3% to 6.1%; that’s the lowest unemployment rate since September 2008. The report topped estimates of 215,000 jobs. The jobs reports for April and May were revised higher; April was revised from 282,000 to 304,000 net new jobs; May was revised from 217,000 to 224,000 new jobs; meaning there were 29,000 more jobs than previously reported.

June marked the best five-month stretch of job creation since early 2006; for the past five months the economy has added at least 200,000 jobs per month. The three-month average rate of hiring in the second quarter now stands at 272,000, compared with 190,000 a month in the first quarter.

The economy has added private sector jobs for 52 straight months. During this span, 9.7 million private sector jobs have been created. Over the past 12 months, the economy has added 2.495 million jobs; and year-to-date the economy has added 1.385 million job; and 2014 is on track to be the best year for job growth since 1999.

Total employment is now 415,000 above the pre-recession peak; and private employment is now 895,000 above the previous peak; the difference between private and total is the loss of government jobs, which has been like an anchor dragging down total employment. State and local governments added 24,000 jobs last month; state and local government employment is up 138,000 from the bottom but still more than 600,000 below the peak. The federal government added 2,000 jobs in June but federal employment is still down 23,000 for the year.

Breaking down the government jobs a bit further, the improvement likely reflects a stabilizing financial outlook for municipalities. When home prices crashed, it cut into the tax base of cities and counties, and the response was to lay off workers. A return to government hiring, even a modest increase could have long term benefits from investment in education and infrastructure.

More than 7.5 million people are employed part-time for economic reasons; this number is up 275,000 in June, although the trend has been and remains down for the year. People who are working part-time because their hours have been cut back or they can’t find full-time employment are included in an alternate measure known as labor underutilization or U-6. The U-6 rate decreased to 12.1% in June from 12.2% in May; and this is the lowest U-6 reading since October 2008.

Full-time employment suffered its third-largest single month-over-month decline since the recession ended; 523,000 full-time jobs were lost while a stunning 799,000 new part-time jobs were added in June. Part-time workers again account for more than 18% of the total workforce, a level that has remained relatively stable since the recession, despite efforts to deny the truth that this is a "part-time" recovery. Part-time jobs had been in rapid decline over the past year, but June's spike cancels out that shift. There are now almost exactly as many part-time workers (28 million) as there were a year ago.

The Labor Force Participation Rate was unchanged in June at 62.8%. This is the percentage of the working age population in the labor force.  We would like to see the participation rate increase, meaning more people are looking for jobs, but a large portion of the recent decline in the participation rate is due to demographics; people are retiring and won’t be re-entering the labor force. The Employment-Population ratio increased in June to 59.0%.

The unemployment rate is calculated by dividing the number of people who are unemployed by the total number of people working or looking for work. The best way for the rate to fall is for the number of unemployed to drop because more people found a job, but it can also decline when people give up looking for work altogether. Still, the jobless rate dropped to 6.1% and that’s because more people found work, not because more people were dropping out of the labor pool; so the jobless rate fell for the right reasons.

As the labor market recovers, it creates a challenge of more people re-entering the labor pool. If more people re-enter the labor pool, the unemployment rate could go up, even as the economy adds jobs. But that hasn’t happened; rather, the number of unemployed who were re-entering the labor pool actually fell in June.

The number of long term unemployed workers has dropped by 1.2 million over the past year but there are still just over 3 million workers who have been unemployed for more than 26 weeks and they are still trying to find work; this is down from over 3.3 million people in May. There are many long term unemployed who may never get jobs again, and the longer they go without jobs, the tougher it will be. And more jobseekers gave up looking for work than found a job, for the 49^th time in the past 50 months. This is surely a demographic shift, but it also means we’re losing the skills and productivity of some of the most experienced workers.  For people who are finding jobs, the median duration of unemployment continues to drop rapidly, from 25 weeks coming out of the recession to just 13.1 weeks today.

Long term unemployment and underutilization indicate that there is still significant slack in the labor market, even though some companies are now beginning to report that they are having to compete to find workers.

So far, the trend has not resulted in higher incomes. Average pay has grown just 2% during the recovery, barely matching inflation and below the long term trend of 3.5%. Last month, the average hourly wage for private-sector workers rose six cents to $24.45. If workers earn more money, they’ll spend more money and that is a boost to the overall economy. The silver lining to the weak wages is that there is no wage inflation, so even though the jobs picture is improving, wage inflation should not influence the Federal Reserve.  Even if hourly wages aren’t moving much, there was a small pickup in the average work week and aggregate hours worked grew by a fairly strong 3.8% annual rate in the last quarter.

Job gains in June were widespread. Retailers added 40,200 workers last month. Financial and insurance firms increased their payrolls by 17,000. Restaurants and bars employed nearly 33,000 more people. Higher-paying sectors continued to lag behind in the jobs recovery. Factories added 16,000 workers, and construction added 6,000 workers, which would not be considered particularly strong. Factory payrolls have increased for 11 consecutive months, adding a total of 139,000 new jobs, well below the target of one million manufacturing jobs for the year. Factory payrolls remain a shadow of their former selves, but the revival in manufacturing is finally creating more job opportunities on the factory floor.

Shrinking unemployment and growing payrolls are always good signs for a stronger economy. However, the nature of these changes matters. If unemployment is low primarily due to labor force dropouts, and if employment growth is being driven by hundreds of thousands of low-earning part-time workers rather than growth in valuable and decent paying full-time positions, it means that the economic recovery still faces a hard slog.

The jobs report was far from perfect but it was very good and it should lead to growth in the economy for the second quarter. So today, stocks had another good day. The Dow closed above 17,000 for the first time ever. The S&P 500 is closing in on 2000. The Nasdaq is back to its highest level since 2000. Bonds dropped. And that is an ongoing trend, the markets race along while workers trudge.

Friday, April 04, 2014 - The March Jobs Report

The March Jobs Report
by Sinclair Noe

DOW – 159 = 16,412
SPX – 23 = 1865
NAS – 110 = 4127 (-2.6%)
10 YR YLD - .06 = 2.73%
OIL + .77 = 101.06
GOLD + 15.50 = 1303.30
SILV + .14 = 20.06

Today is a jobs report Friday. Let’s get geeky.

The Labor Department reported nonfarm payrolls increased by 192,000 jobs last month after rising by 197,000 in February (that’s revised from 175,000). The prior 2 months were revised to show 37,000 more jobs than previously estimated; the revisions indicate that the bad winter weather was not a huge problem for the labor market; it did have an effect but not huge, and we certainly shouldn’t hear any more weather related excuses. The unemployment rate was unchanged at 6.7% as more people were looking for jobs. The consensus estimate was 200,000 jobs, so the figures were a little below expectations.

Private employment rose to 116.09 million, finally moving beyond the previous high of 115.98 million recorded at the very start of the recession in January 2008.Total employment is just a little below the pre-financial crisis days; we still have about 437,000 fewer jobs than the peak in 2008, but private employment is now above the peak by 110,000 and at a new all-time high; the difference is that more than a half million government jobs have been cut during that time; also, the population and the labor force has grown over the past 6 years, so the unemployment rate remains fairly high. And the idea is not just to get back to where we were, but to get back to where we should be. Keep in mind, we have 15 million more people now than we did then.

The economy added 533 thousand jobs in Q1 this year compared to 618 thousand in Q1 2013; the bad weather is the excuse for the weaker performance. Still the unemployment rate has dropped from 8.2% in March 2012 to 6.7% now.

The Labor Force Participation Rate was increased in March to 63.2%. This is the percentage of the working age population in the labor force.  And while the participation rate is still low compared to the past 20 years, it is a positive sign that more people are looking for jobs, suggesting they were lured back into the job hunt as openings began to appear. Or possibly, more long-term unemployed were pushed back into the job market as benefits were cut. The number of long-term unemployed fell by 110,000, and over the past year, the ranks of the long-term jobless have dropped by 837,000; meanwhile, the ratio of the population reporting they had a job ticked up to 58.9% from 58.8%. Much has been made of the multiyear slide in the labor force participation rate since the financial crisis of 2008. In the last few months, however, the labor force participation rate has actually stabilized.

Anyway, about a half million people jumped back into the labor pool and about that many found jobs; if it were not for the increase in the size of the labor force, the unemployment rate would have fallen to 6.5%. It also means that the unemployment rate is unlikely to keep falling as sharply as it has in the last two years, because people who are again looking for work are counted as unemployed, while those who have given up and dropped out of the labor force are not.

There are 7.4 million people working part-time who would prefer to work full-time, or they are part time because their hours have been cut back, or they have given up looking for a job. There is a separate measure for them, known as the U-6 unemployment rate, which comes in at 12.7%; up from 12.6% in February, but down from 13.8% a year ago. The headline unemployment rate of 6.7% is known as U-3. The U-6 includes all those people in U-3 plus all the underutilized and discouraged workers. In healthier job markets, the gap between U-3 and U-6 is closer to 3% or 4%.

After months of declines in the part-time labor force, the BLS reported a spike of 414,000 new part-time workers in March, which was the largest monthly increase in nearly two years. This could just as well be an aberration, as it was a year ago, but the part-time picture in the American workforce is far from rosy. The financial crisis resulted in a spike in the number of part-time workers as a percentage of the labor force, and this has remained elevated ever since.

The increase in jobs was paced by gains in construction, retail and professional services. Government employment over all remained flat, with federal and state governments cutting 11,000 jobs even as local governments added 9,000 positions. Over the past 12 months, total federal employment has fallen by 85,000. That's pretty much how it has gone throughout the grinding recovery; private hiring has been slow but steady, while austerity has led to government job cuts that have helped keep the recovery frustratingly slow.

The health care sector added 19,000 jobs. Business services added 57,000 jobs. Food services employment increased by 30,000, bringing the sector’s gain over the past year to 323,000. The manufacturing sector lost 1,000 jobs.

While average hourly earnings were basically flat, the length of the average workweek edged higher. The average work week for private employees edged up to 34.5 hours, offsetting a net decline over the prior three months; as a consequence of the bad weather, many people lost time on the job, but it was made up in March. Average weekly hours, at 34.5 per worker, aren't far off of the 34.7 hours per worker recorded six years ago, but when you add up a fifth of an hour across more than 100 million workers, it makes a very big difference in the amount of time Americans actually spent on the job.

Average hourly earnings for private employees fell by 1 cent to $24.30 from a month earlier. Over the year, average hourly earnings have risen by 49 cents, or 2.1%. The average weekly wage rose to $838.55 from $833.83. The reason for this anomaly: a 12-minute increase in the average amount of time worked each week.  Conclusion: Bargaining power for workers is still subdued. But their services are more in demand.

The jobs report also provides details about who is benefiting from recovery and who is not. The recovery has been good for college educated workers and whites. It has been much more difficult for the long-term unemployed, young adults without a college education, and African Americans. Among adults 25 and older who have a bachelor’s degree the unemployment rate is just 3.4%, about half the over-all rate.

The unemployment rate for college graduates never went above five per cent in the downturn. At the other end of the educational spectrum, things were very different. For adults 25 and older without a high-school diploma, the jobless rate hit 15.6% in 2010. Last month, it stood at 9.6%.

Among white men aged 20 and over, the unemployment rate is now 5.3%; for African-American men over 20, it is 12.1%. The gap between white and black females is also very large, 5.3% of white women aged twenty and over are out of work (the same as the rate for white men), but 11% of black women in the same age group are jobless. Hispanics also have substantially higher rates of unemployment than whites, but the differences aren’t as large. Among Hispanic men aged twenty and over, the jobless rate in March was 6.9%; among Hispanic women aged twenty and over, the rate was 8.4%.

For teenagers between the ages of 16 and 19 who aren’t in school or college, the unemployment rate is 20.9%. That’s down from 23.3% a year ago. It’s still a very high figure, and, among minority teenagers, it’s even higher.

The stock market moved a little higher this morning following the jobs report. It wasn’t a bad jobs report that sank the market today. Most of the stories I read had a theme of not too hot, not too cold, a Goldilocks report. The Fed uses the jobs report to help determine the timing and pace of further cuts to its monthly bond-buying program. The central bank also looks to the unemployment rate as a factor in deciding when to raise its benchmark interest rate. This report did not sway the Fed one way or the other.

What went wrong on Wall Street? It’s always dangerous to lay an exact cause on any singular event, but the big damage today was in the Nasdaq and the tech and biotechs. There’s a little bit of nervousness about some of the high multiples in the biotech area and computer and Internet-related stocks. You’re having another wave of selling in that very high-momentum group. When you’re at record high levels, people start to get a little tentative going into weekends.

Friday, March 07, 2014 - Jobs Report Friday and Aiming Higher

Jobs Report Friday and Aiming Higher

by Sinclair Noe

DOW + 30 = 16,452
SPX + 1 = 1878
NAS - 15 = 4336
10 YR YLD + .05 = 2.79%
OIL + 1.00 = 102.56
GOLD – 9.50 = 1341.90
SILV - .51 = 21.03

This is a jobs report Friday. Here’s what you need to know. The economy added 175,000 net new jobs in February; this topped estimates of 150,000. The unemployment rate moved higher to 6.7%, up from 6.6% in January. After two months of very bad jobs reports, we returned to just below average levels of 189,000 per month; not a great showing but not ugly. The December and January reports were revised higher by 25,000 jobs. So why did the unemployment rate go up?

The labor pool got bigger; more people were looking for work. The ranks of the short-term unemployed declined by 61,000 to 2.3 million, while the ranks of the  long-term unemployed jumped by 200,000 to 3.85 million, and the labor participation rate held steady at 63%, just above the generational low of 62.8% in December. That seems to be a discrepancy, but the unemployment rate is based on a separate survey of households from the one that tracks hiring by employers, and the household survey showed an increase of 264,000 in the labor force. The participation rate is still well below the range of 66% to 67% where it had been for the past 20 years or so.

The unemployment rate went up slightly because that 264,000 gain swamped an increase of 42,000 in the number of people who were employed in the survey, but was positive over all because it showed more people are looking for work. And in the age group of people we expect to be working, the 25 to 54 year olds, participation rate increased in February to 81.2% from 81.1%, and the 25 to 54 employment population ratio was unchanged at 76.5%. 

Last month 10.5 million people were unemployed; including 3.8 million who have been out of work for six months or more; while 5.5 million have moved to retirement, intentional or not; and 3 million are disabled and the number of people applying for Social Security disability benefits has spiked in recent years. Even though February saw more people returning to the labor force, the percent of the population working or looking for work remains near a 30-year low due to millions of dropouts during the recession. One of the consequences of long-term unemployment is the loss of job skills, or for younger workers, they never really develop job skills and may face a lifetime of lower wages.

Most of the jobs, 162,000 were in the private sector. State and local governments have been doing a bit of hiring, adding 19,000 jobs last month, while the federal government continues layoffs, cutting 6,000 jobs. Private sector payroll employment has now posted gains for 48 consecutive months and with businesses adding about 8.7 million jobs over that time, private sector payroll is almost back to the previous peak back in January 2008; just another 130,000 more to go; although that does not account for population growth. So, there’s a good chance private employment will be at a new high next month. And total employment will probably be at a new high before the end of summer.

State, local, and federal government had 32,000 fewer jobs than one year ago. This marks the 56th consecutive month, going back to July 2009, that government employment was down on a year-over-year basis, excluding the temporary jobs added for the 2010 census. If you count them, the string is 43 months, going back to August 2010. Still, by a wide margin, this is the longest string of government job cuts since the end of World War II. Governments now employ 15.9 percent of all Americans who have jobs. That is the lowest proportion since 2001.

The one area of improvement in government jobs seems to be coming from state governments because their finances are improving. While local government payrolls are holding steady, state-level payrolls have increased for seven consecutive months, pulling the number of jobs back up to 2011 levels. The main sources of new jobs have been education and healthcare.

An alternate measure of employment, the U-6, includes underutilized workers; the U-6 came in at 12.6%, down from 12.7%, and the lowest level since November 2008. There are still 7.2 million people working part-time for economic reasons; because they can’t find full-time employment or their hours have been cut back.

Once again the report highlighted the deeply uneven nature of the recovery in the jobs market. The unemployment rate for white people was 5.8%, for African Americans it was 12%, and Hispanics 8.1%, and unemployment for teenagers was 21.4%. Of the 175,000 new jobs last month, 99,000 went to women. Over the 12 months through February, women’s nonfarm employment rose by 1.07 million jobs, half of the total US gain of 2.16 million. A couple of years ago, women accounted for just 37% of annual job gains.

Here is the full breakdown of "young vs old" jobs since December 2007: those 55 and older have gained 4.9 million jobs. Those under 55 are still some 3.1 million jobs below their December 2007 level.

The quality of jobs has been a big concern for some time, however in February, white-collar professions including accounting, bookkeeping and consulting led the gains, as the professional and business service sector gained 79,000 jobs. Here’s the catch; one-third of the professional jobs were temporary jobs.  Blue-collar hiring was more muted with the manufacturing sector adding 6,000 positions and construction gaining 15,000. Retailers cut 4,100 jobs as a 12,000 gain in food and beverage stores was offset by a 12,000 decline in electronics and appliance stores. The leisure and hospitality sector added 25,000 jobs.

Average hourly earnings rose 0.4%, or 9 cents to $24.31 per hour; bringing the year-over-year gain to 2.2%; not much but a gain. The average workweek fell to the lowest level since January 2011, which might be due to the bad winter weather, but the weather-sensitive construction sector added 15,000 jobs last month. We know that the household survey took place during a week of storms in the northeast. The Labor Department also reported that 601,000 people in the household survey said they could not get to work because of the weather last month, nearly double the number who typically said that in February on a historical basis. So, weather had an effect, but at some point we just move beyond the weather excuse.

One interesting point about hours worked and hourly wages is that we can try to normalize this data by looking at average weekly earnings. In February, this number dropped slightly to $682.65 from $683.74. So, hourly wages were up  very slightly and hours worked were down a little, and it might be easy to explain this as weather related, but then we look  at average weekly earnings over  the past year, which would not be weather related, and earnings grew just 1.3%, which is the weakest earnings growth in 5 years.

The 175,000 net jobs added in February extrapolates to a pace of 2.1 million jobs a year, squarely within the long-term range. So we have a tepid jobs recovery; just enough to call it a recovery, not enough to call it a good recovery, not enough to instigate action to make it better, and not enough to see the virtuous cycle of job growth that feeds on its own strength.

It will likely be good enough for the Federal Reserve to put taper on auto-pilot. They will continue to trim back monthly bond purchases by $10 billion at their next FOMC meeting later this month. Yesterday, William Dudley, president of the Federal Reserve Bank of New York, suggested that it would take either a recession or an economic miracle to shift the Fed from its course.

Back in December, then-Fed head Ben Bernanke justified the taper as a program that was intended to foster job growth and that job growth was on track, so the work of QE bond buying was accomplished. Many Fed policymakers are still concerned about inflation, even though we’ve had more disinflation of late; and their thinking is they need to be properly positioned to raise rates if they need to battle inflation; before they could raise rates, they want to be out of the bond buying business.

Since the last quarter of 2012, nominal hourly wage growth has increased from 1.5% to the current 2.2%, while inflation has decreased from just under 3% to about half that pace now. That means that most regular workers were losing ground as price growth exceeded hourly wage growth; that seems to be changing now; wage growth is just a little more than inflation. That’s good but then we consider weekly earnings growth, which is around 1.3% annualized, workers are still losing ground to inflation, or at best – flat. So, this is not a reason to fear inflation, nor is it a reason for the Fed to raise interest rates.

The Fed’s target for unemployment is 6.5%, which doesn’t really sound like full employment. It wouldn’t be bad to do better; to get the unemployment rate below 6.5%; we really shouldn’t worry about the inflationary pressures of a tighter job market, in part because we haven’t seen any inflationary pressures, even though we are getting close to the target. Of course, the Fed may have limited ability to help on the jobs front. It would be nice to see more fiscal policy aimed at creating jobs. Inflation has not been an issue at all. The public debt has also not been an issue at all, and attempts to cut spending have been completely counterproductive and damaging to the short and long-term health of the economy.

Real wage gains for low and middle income workers would be a good thing. If people can start to get ahead, just a little, from their hard work, they are likely to take a more active role in the economy and that might mean we could eventually see some momentum in the economy. In other words, we still need to aim higher.