Jobs Report a Mixed Bag, Wage Inflation Missing Altogether

The labor market continued to produce robust job growth in February, adding 242k jobs and maintaining the unemployment rate at 4.9%. The participation rate ticked up to 62.9% while the underemployment rate, a measure of the total unemployed plus those employed part time for economic reasons, fell to 9.7% from 9.9% in January. Both prints signal that slack in the labor market is diminishing and traditionally would indicate that wage inflation is on the horizon. But Friday’s jobs report showed no such sign of increased pay for American workers. Average hourly earnings fell 0.1% month-over-month, and fell to 2.2% from 2.5% on a year-over-year basis. The average workweek also fell from 34.6 to 34.4, which compounds the month-over-month drop in wages. Nearly all the job growth in February came from private payrolls, despite the manufacturing subcomponent, which lost 16k jobs. While several of the headline numbers were certainly positive, we can’t help but see Friday’s jobs report as a microcosm of the broader U.S. economy. GDP growth is positive, but certain sectors, such as energy and manufacturing, are struggling; the U.S. dollar is strong, but is weighing on exports and inflation. We expect this mixed bag of economic developments to continue in 2016, which gives us confidence that, while volatility may persist in the near-term, we’re in for a slow but steady year of growth.

Source: Bloomberg