FTG Blog - 5 Things to Watch in the February Jobs Report

5 Things to Watch in the February Jobs Report

The Labour Department on Friday releases its February jobs report—the last major economic data before next week’s Federal Reserve policy meeting, which could see officials, raise short-term interest rates for just the third time since the financial crisis. Economists surveyed by The Wall Street Journal expect the report will show nonfarm payrolls rose a seasonally adjusted 197,000 in February and the unemployment rate ticked down to 4.7%.

1.) Pay-Raise Pickup?

Wages were a weak spot in the January jobs report, with average hourly earnings of private-sector workers up a mere 0.1% from the prior month despite minimum-wage increases in many states. A pickup in wage growth would signal a tightening job market is forcing employers to raise pay to attract and retain workers, which could add to the Fed’s confidence that long-sluggish U.S. inflation is headed higher. Economists expect a 0.3% monthly gain for average hourly earnings in February.

2.) Keeping the Pace

The pace of job creation has slowed since 2014 and 2015, though January was a strong month for hiring with 227,000 new non-farm jobs. The three-month average was a more modest 183,000. Forecasters think February’s reading will come in near the recent trend, though there are signs that hiring could be even stronger, and well above the level that many economists think is needed to keep pace with population growth.

3.) Down, In and Out

The unemployment rate was 4.8% in January, the 17th consecutive month that it hovered at or below 5%. Joblessness has been steady despite continued job gains because the workforce-participation rate has stabilized after a long decline. That’s an encouraging sign, though many economists think participation will resume falling at some point due to demographic and other trends. Watch both participation and unemployment in Friday’s report, as well as the broader measure of unemployment and underemployment known as the U-6.

4.) Weather Vane

Unusual winter weather can cause odd swings in the payrolls data, despite seasonal adjustments, and February was historically warm across much of the U.S., while California experienced heavy, drought-easing rain. “Hiring in weather-sensitive sectors like construction may have been hit by the rainstorms in California last month, although that may have been offset by a boost to hiring from the mild winter in the Northeast,” said Andrew Hunter, U.S. economist at Capital Economics, in a note to clients.

5.) Federal Freeze

President Donald Trump on Jan. 23 ordered federal agencies to stop filling vacant positions, with some exceptions. The hiring freeze came too late in the month to affect payrolls data for January, when the federal government added an estimated 4,000 employees, but it could show up in the February report.