Friday, March 7, 2014

February Employment Report

The February Employment report showed an increase of 175,000 jobs (162,000 in the private sector) while the unemployment rate rose slightly to 6.7%.  The initial response of many was that this was a good report. Though the report was pretty good, that's relative to expectations and recent trends (we used to want gains in excess of 200,000 for a report to be considered good).  Over the last 3 months, the economy has added an average of about 129,000 jobs.  Let's look at some of the details.

The leading growth sector was professional/business services, which added 79,000 jobs (121,000 so far in 2014, about 40% of all job gains).  Healthcare bounced back somewhat, adding 9500 jobs in February (averaging just under 6000 per month in the last 3 months - more on the health care sector later in this post).  While payrolls increased, aggregate hours worked declined in February and is down slightly in 2014.  So far this year, hours worked is down in construction, manufacturing, retail trade, information services, and education/health while it has risen in professional/business services, mining, financial activities, and leisure/hospitality.

The increase in the unemployment rate was slight, but still reflects a decline of 0.3% over the last three months while the participation rate remained stable over that period (so the recent decline in the unemployment rate was due to employment gains as opposed to fewer people looking for work).  Meanwhile, the employment-population rate remained at 58.8%, above it's cycle low of 58.2% (down from 63% before the recession).  Interestingly, the increase from the low was due to higher employment-population ratios for less educated workers.
  • the ratio for those that did not finish high school has risen 3.2% from it's low (currently 41.7%; near the highest since Spring 2008) 
  • high school grads rose to 54.7%, up 1.1% from it's low  
  • those with some college declined to 62.8%
  • college grads declined to 72.6%
The figures for those with some college as well as college grads are both near the lowest since records began in 1992 (October 2013 was lower in both cases).  still, the more education the better, as reflected by the higher employment-population ratio for those with more education.

What explains the slowdown in employment in health services?  The three-month gain in healthcare employment (17,700) is the lowest since records started being kept in 1990 while the 12-month gain fell to below 200,000 for the first time since 2000.  Which components of healthcare are responsible for the slowdown?  Hospitals have reduced employment by 2800 over the last year, the first year-over-year decline since early 1995 while nursing care facilities have shed nearly 10,000 jobs over the last 12 months, continuing a pattern begun in late 2011 after decades of adding a significant number of jobs.

What are the key takeaway from the report?  The economy remains on a modest-to-moderate growth track - not too hot and not too cold.  Some of the recent slowdown in employment growth may reflect structural changes taking place in health care, particularly among hospitals.