The American economy stirred to life last month, creating more jobs than in the previous two winter months and raising hopes that momentum in the labor market would gradually pick up as the cold weather in many parts of the country eases with the arrival of spring.
The report from the Labor Department for February, which came on Friday after job figures for December and January that were much weaker than the underlying trend, eased fear that the economy was downshifting to a slower pace. The data led some experts to conclude that weather, not a fundamental slowdown, was a major factor behind the recent shortfalls.
With employers hiring 175,000 workers, the payroll gain in February was hardly cause for celebration — it was still well short of the pace needed to return the economy to full employment in the next few years. But it was twice the number added in December, when the cold and snow arrived.
“It’s a normalization,” said Julia Coronado, chief economist for North America at BNP Paribas. “It’s not clear just how much effect the weather had, but it seems like we’re on a moderate but steady hiring trend.”
The unemployment rate rose 0.1 percentage point to 6.7 percent, a reversal of the sharp downward trend recorded since last summer. Some experts argued that was not cause for alarm, but rather a sign that more people were moving back into the labor force and searching for jobs as openings increased.
The Labor Department announcement had been awaited eagerly and was viewed as a wild card, with economists struggling to estimate the impact of wintry weather in many parts of the country as well as seasonal adjustments by government statisticians.
Before Friday’s report, the consensus among economists on Wall Street called for employers to have added 149,000 positions in February, with the jobless rate remaining flat at 6.6 percent.
In December, the economy added 84,000 jobs, and in January, it created 129,000 positions. Both numbers fell well short of expectations among experts on Wall Street.
The healthier-than-expected gain in hiring in February is very likely to remove some of the anxiety that has been hanging over the economy because of the weak labor market data in the previous two months, as well as other gloomy signals like a downward revision in the government’s estimate of economic growth late last year and a decidedly mixed holiday shopping season for many retailers.
It is also almost certain to mean the Federal Reserve will stick with its plan to slowly ease back its stimulus efforts when policy makers meet at the end of this month. In December, the Fed announced the scaling back after job gains of more than 200,000 in the fall, only to watch the pace of hiring shrivel.
“In our view, the February employment report signals that the U.S. has returned to moderate job growth and that better economic data lie ahead once weather effects subside,” said Michael Gapen, senior United States economist at Barclays.
On Thursday, William C. Dudley, president of the Federal Reserve Bank of New York, told The Wall Street Journal that the “threshold is pretty high” for a major deviation in the course of reducing its monthly bond purchases, adding that his view of the economy had not been shaken by the weak batch of the data recently.
Despite the slow but steady pullback in the stimulus efforts, overall monetary policy, he said on Friday, should remain “highly accommodative” given the uncertainty about just how fast the labor market is improving.
For all the anticipation that preceded Friday’s report, Wall Street’s reaction was muted in midday trading. Major averages like the Standard & Poor’s 500-stock index and the Dow Jones industrial average were barely changed from Thursday’s close. The Nasdaq was off 0.6 percent.
In February, white-collar professions including accounting, bookkeeping and consulting led the gains, as the professional and business service sector gained 79,000 jobs. Blue-collar hiring was more muted with the manufacturing sector adding 6,000 positions and construction gaining 15,000.
After years of being a headwind on job growth, government hiring actually bolstered the figures for February, although all of those increases were at the state and local level. The federal government shed 6,000 jobs.
There was also a divergence in what unemployed workers face over all. While the number of people who have been unemployed for less than five weeks fell by 61,000 to 2.3 million, the ranks of the long-term jobless who have been out of work by 27 weeks or more rose by 203,000 to 3.8 million. The broadest possible measure of unemployment, including people who are working part-time for economic reasons, fell by 0.1 percentage point to 12.6 percent.
Despite the slight uptick in the unemployment rate, which is based on a separate survey of households from the one that tracks hiring by employers, some economists said they were encouraged that the household survey showed an increase of 264,000 in the labor force.
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.
“As people come back and see jobs opening up, there should be a rebound in the labor force,” said Joseph G. Carson, director of global economic research at AllianceBernstein. “The overall direction is a lower jobless rate and more job growth going forward.”
There has been an intense debate among economists and traders as to the effects of the weather in recent months versus more fundamental factors in the economy.
February’s data is unlikely to resolve the debate.
In fact, some economists are already looking ahead to the release of figures for March and April, arguing that the current batch of data is not very reliable and that so-called clean data will not be available until the cold weather eases and spring arrives.
Some experts said Friday the weather was one reason the length of the typical workweek edged down slightly in February. 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.
In addition to the usual seasonal factors and statistical quirks, February’s report was difficult to predict because other surveys have offered contrary signals about the labor market this week. As it turned out, the private sector added 162,000 jobs, while the public sector added 13,000.
A private survey by ADP suggested healthier growth, but the Institute for Supply Management’s nonmanufacturing survey augured weakness. New weekly jobless claims reported by the Labor Department on Thursday were more encouraging.
“This is hardly a ringing endorsement of the idea that most or all the weakness of recent payrolls is weather-related, but it is a step in the right direction,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics, in a note to clients shortly after the release. “In one line: good enough to keep the Fed tapering.”
Courtesy of the New York Times