The second warmest February on record might have had more to do with the larger than expected rise in new jobs last month than the underlying health of the US economy.
February saw another 235,000 jobs created, easily topping Wall Street forecasts and hardening expectations for a third increase in short-term interest rates this week.
Adding to the rate pressure, the US created 9,000 more jobs in December and January than previously reported, meaning the actual number of new jobs reported was 253,000.
In fact the market saw the jobs report as giving the US Federal Reserve the green light to raise interest rates next week despite slowing economic growth.
In fact the US had the second warmest February in more than a century – since 1895 (1954 was the warmest) in fact when national weather records started, and the sixth warmest winter on record.
Economists say the very warm winter helped boost job because it has allowed construction and other outdoor work to continue without the usual hold ups caused by winter storms.
That can be seen in a comparison of monthly job numbers – US job growth has averaged more than 186,000 per month since January 2010, but in December through February, that jumped to 209,000, well above the 100,000 a month needed to mop up growth in the working age population.
And February 2016 was also a very warm month (after another warm winter) and that saw 242,000 jobs created that month, later revised to 245,000.
Marketwatch.com pointed out that the number of people who said they could not work last month because of bad weather was 157,000, the lowest level for February since 2002.
By contrast, the number of people who said they could not work in February over the prior five years averaged 314,000 (which included two very cold starts to the year in 2014 and 2015 when the economy contracted).
And while Donald Trump’s victory in last November’s presidential election has sparked a stock market rally and jumps in consumer and business confidence, there has been no surge in either business or consumer spending.
In fact US economic growth slowed to an annual rate of 1.9% in the December quarter of last year and reports so far this year has indicated no real acceleration in consumer activity or investment.
Job gains in construction, education, manufacturing, healthcare and mining helped push the US unemployment rate down to 4.7% from 4.8%, while rising demand for workers and minimum wage increases helped sustain year-on-year wage growth of 2.8%.
The figures reinforce the message from the Federal Reserve that the US is homing in on full employment and remove a final barrier to a quarter-point rate increase on Thursday morning, our time.
Some measures of inflation have been edging up as well — although the Fed’s preferred measure of year-on-year price growth remains below its 2%.
The latest figures revived forecasts that the Fed could end up pushing through four quarter-point increases in rates this year, more than its December median forecast for three rises.
But four rate rises is based on an erroneous reading of the health of the US economy – it is not running at a 3% plus growth rate would indicate, based on the stepped up level of jobs creation in the winter and the rise in wages.
The labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, increased one-tenth of a percentage point to 63%, the highest level since March 2016.
The employment-to-population ratio rose to 60%, the highest since February 2009, from 59.9% in January.
Retail sector employment was weakest of all sectors with 26,000 jobs lost in the month, the biggest decline since December 2012, after a gain of 39,900 jobs in January.
Retailers including J.C. Penney Co Inc Macy’s and a host of smaller groups have announced thousands of layoffs as they shift toward online sales and scale back on brick-and-mortar operations.
Government payrolls increased by 8,000 jobs despite a freeze on the hiring of civilian federal government workers that went into effect in January.
