Last Friday (March 10, 2023), the U.S. Bureau of Labor Statistics (BLS) released the latest labor market data—— Employment Situation Summary – February 2023 – This indicates a slight decline in the number of net job creation and a slight increase in the unemployment rate. After months of rate hikes, it’s too early to say whether this marks a turning point in the U.S. labor market. We’ll know more next month. Results for January were very strong, so a slight decline is nothing to worry about. Most aggregates were stable, and net employment change in February remained relatively strong for the pre-pandemic period.
Real wages continue to fall in the face of slowing inflation. Overall, the U.S. labor market is stable and does not appear to be contracting rapidly amid Fed rate hikes.
Overview February 2023 (seasonally adjusted):
- Employment rose by 311,000, down from a boom in January.
- Total employment in the labor force survey showed a net increase of 177,000 (0.11%).
- The net increase in the labor force was 419,000 (0.25%).
- The participation rate rose 0.1 percentage point to 62.5%.
- Measured total unemployed rose by 242,000 to 5.936 million.
- The official unemployment rate rose 0.2 percentage points to 3.6%.
- The broad measure of labor underutilization (U6) rose 0.2 percentage points to 6.8%.
- The employment-to-population ratio held steady at 60.2% (still well below the May 2020 peak of 61.2).
For those confused about the difference between wage (institutional) data and household survey data, you should read this blog post – The U.S. labor market is in bad shape – I explain the differences in detail here.
Some months have very small differences, while others have large differences.
Salary Employment Trends
The U.S. Bureau of Labor Statistics states:
Total nonfarm payrolls increased by 311,000 in February, compared with the 343,000 monthly average for the prior six months…
Leisure and hospitality added 105,000 jobs in February, similar to the 91,000 average monthly gain in the prior six months…Employment
The number of people in the leisure and hospitality sector was 410,000, or 2.4%, below its pre-pandemic level in February 2020.Retail payrolls rose by 50,000 in February … little changed in net for the year.
Government sector payrolls rose by 46,000 in February, about the same as the 44,000 average monthly gain in the preceding six months… Overall, government sector employment was 376,000 below its pre-pandemic level in February 2020, or 1.6%.
Employment in professional and business services continued its upward trend in February (+45,000)…by an average of 35,000 per month
within the past 6 months.The healthcare industry added 44,000 jobs in February, compared with an average of 54,000 per month in the previous six months…
Construction payrolls rose by 24,000 in February, in line with the 20,000 average monthly increase in the previous six months.
Employment on social assistance increased by 19,000 in February, similar to the 22,000 average monthly increase in the previous six months.
In February, the information industry lost 25,000 jobs…a decrease of 54,000 since November 2022.
The transportation and warehousing industry lost 22,000 jobs in February…a decrease of 42,000 since October 2022.
Employment in other major industries was little changed in a month…
The first graph shows the monthly change in employment (in thousands, expressed as a 3-month moving average to remove monthly noise). The red line is the annual average. Observations between January 2020 and January 2020 were excluded as outliers.
The labor market boomed in January with no signs of collapsing or slowing down significantly.
However, some industries have still not regained the jobs lost in 2020-21.
The graph below shows the same data in a different way — in this case, the graph shows the average monthly net change in wage employment (real) for the calendar year 2005 through 2023.
The red marks on the columns are the results for the current month.
Average monthly change – 2019-2023 (000s)
| Year | Average Monthly Employment Change (000s) |
| 2019 | 163 |
| 2020 | -774 |
| 2021 | 606 |
| 2022 | 399 |
| 2023 (present) | 408 |
Labor Force Survey Data – Employment Rise, More Working-Age People Finding Jobs
Seasonally adjusted data for January 2022 shows:
1. Total employment in the labor force survey showed a net increase of 177,000 (0.11%)—a growth rate significantly lower than that in January.
2. Net labor force gain of 419,000 (0.25%) – growth also slowed.
3. The participation rate increased by 0.1 percentage point to 62.5%.
4. As a result (in accounting terms), total unemployment increased by 242,000 to 5,936,000 and the official unemployment rate rose by 0.2 percentage points to 3.6%.
It is difficult to assess the strength of the labor market. Last month’s data was exceptionally strong, which could lead to a rise in participation rates as employment falls back to more “normal” shifts, albeit on the slower side of the indicator.
The chart below shows monthly job growth since January 2008 and excludes extreme observations (outliers) between May and January 2020 that distort the current period relative to the pre-pandemic period.
The employment-to-population ratio is a good indicator of the strength of the labor market because the denominator, population, is not particularly cycle-sensitive (unlike the labor force), so movements are relatively clear.
The graph below shows the US employed population from January 1950 to February 2023.
In February 2023, the rate remained unchanged at 60.2%.
The pre-pandemic peak level was 61.1% in May 2020.
Unemployment and Underutilization Trends
The U.S. Bureau of Labor Statistics states:
The unemployment rate in February was 3.6%, and the number of unemployed persons was 5.9 million, both of which rose slightly.There has been little net change in these measures since the start of the year
2022.…The number of people unemployed for less than five weeks rose by 343,000 to 2.3 million in February, more than offsetting a decrease in the previous month. The number of long-term unemployed (unemployed for 27 weeks or more) was 1.1 million, little changed in February, or 17.6% of the total…
The number of people working part-time for economic reasons was 4.1 million in February, little changed…
The number of people outside the labor force who currently want to work was little changed in February at 5.1 million.
So it’s a fairly static picture.
Unemployment rose in February as employment growth was weaker than labor force growth (given a slight increase in the participation rate).
The first graph shows the official unemployment rate since January 1994.
The official unemployment rate is narrow Measures of labor waste, which imply strict comparisons with the 1960s, for example, in terms of tightness in the labor market, must take into account broader measures of labor underutilization.
The figure below shows the BLS metric U6, which is defined as:
Total unemployment, plus all marginalized workers plus total number of people working part-time for economic reasons, as a percentage of all civilian labor force plus all marginalized workers.
As such, it is the broadest quantitative measure of labor underutilization published by the BLS.
Pre-COVID, U6 was 6.8% (January 2019).
In February 2023, the U6 indicator was 6.8%, up 0.2 percentage points due to rising unemployment, while other determinants were largely unchanged. It has risen 0.3 percentage points since December 2022.
How is wage growth in the US?
The U.S. Bureau of Labor Statistics reports:
Average hourly earnings for all private nonfarm employees rose 8 cents, or 0.2%, to $33.09 in February. Average hourly earnings have increased 4.6% over the past 12 months. Average hourly earnings for private-sector production and nonsupervisory employees rose 13 cents, or 0.5%, to $28.42 in February.
These increases are modest relative to current inflation rates.
However, the latest- Summary of BLS Actual Benefits (posted February 14, 2023) – Tell us:
Real average hourly wages for all employees fell 0.2% from December to January…This result stemmed from a 0.3% increase in average hourly earnings and a 0.5% increase in the Consumer Price Index (CPI-U) for consumers in all cities…
From January 2022 to January 2023, real average hourly earnings fell 1.8% on a seasonally adjusted basis. The change in real average hourly earnings combined with a 0.3% increase in average weekly hours worked resulted in a 1.5% decline in real average weekly earnings. period.
Overall, while inflationary pressures are moderating, nominal wage growth remains lagging, with real wages continuing to fall as a result.
The table below shows the change in nominal Average Hourly Earnings (AHE) by industry and inflation-adjusted AHE by industry in February 2023 (note that we are using January’s CPI for the adjustment – this is the latest data).
There is considerable variation across sectors, with most sectors now seeing improvements in real wage outcomes (except transport and warehousing).
The chart below shows the annual growth rate of real average hourly earnings from 2008 to February 2023.
Another indicator that tells us whether the labor market is shifting in favor of workers is the turnover rate.
The latest BLS data — Job Openings and Labor Turnover Summary (Published March 8, 2023) – states:
The number of job vacancies fell to 10.8 million on the last working day of January…
The changes were modest at 6.4 million and 5.9 million, respectively. Among separations, resignations (3.9 million) decreased while layoffs and layoffs (1.7 million) increased…The number of quitters decreased to 3.9 million (-207,000) in January, a modest increase of 2.5%.
If there is a recession in the U.S. labor market, the resignation rate will fall. So in January, there were only signs that workers were reducing their resignation behavior – albeit very little.
in conclusion
In February 2023, the latest US labor market data showed that strong job growth in January may have been an outlier, with growth slowing.
But for the pre-pandemic period, February’s net employment change remained relatively strong.
Unemployment rose because the labor force expanded faster amid a modest increase in the participation rate while job growth slowed.
Real wages continue to fall in the face of slowing inflation.
Overall, the U.S. labor market is stable and does not appear to be contracting rapidly amid Fed rate hikes.
Enough for today!
(c) Copyright 2023 William Mitchell. all rights reserved.
