the Employment Situation
The Bureau of Labor Statistics released its February 2011 Employment Situation report on Friday.
It’s not a great report but it’s a good one, one that reinforces the consensus view on Wall Street that the overall economy in the US continues to heal. The initial move of investors in the New York market on the Friday open–just after the BLS announcement–was to sell. But the downdraft was mild. And it arguably was more a function of how strong the market has been over the past few days than any negative reaction to the jobs report itself. Yes, the market closed down. But, again, I think this had little to do with the job numbers. More on the market when I update Current Market Tactics tomorrow.
headlines
The headline numbers were:
–the economy added 192,000 jobs in February. That’s well above the 100,000 positions the US needs to create to absorb new entrants into the workforce, and it’s within shouting distance of the 200,000+ that would indicate a healthy recovery.
–the unemployment rate fell below 9%, to 8.9%. There are legitimate questions about how comparable this figure is to results in prior recoveries. But it is at least psychologically important to get rid of the nine to the left of the decimal point. Also, the year-ago unemployment rate, where comparability issues aren’t so much at issue, was 9.7%.
revisions: more good news
There’s more positive news in the report than just the headlines:
The December job additions figure has undergone its second monthly revision. The initial number reported was +103,000 jobs. The January revision added 18,000. The February revision chipped in another 31,000, bringing the final December number to +152,000 jobs. That breaks out into +167,000 jobs in the private sector, -15,000 in government. Thelatter secots is likely t ocontinue to be weak, as state and local governments try to bring chaotic finances under control.
The January job additions figure, which was initially penciled in at a disappointing +36,000, has been revised up by +27,000. According to the BLS, the private sector added +68,000 positions, government declined by -5,000 workers. One more revision will be made, next month.
investment implications
It certainly is comforting to see the January jobs number revised up. And it’s good to see the February figure as high as it is. At the same time, though, the Employment Situation report is only confirming what consumer spending figures, consumer confidence numbers and private surveys by service providers to employers have been telling us for some time.
I think we’ve passed the point in the economic cycle where this BLS report will be crucial to investors. I suspect that if in coming months a jobs figure is either surprisingly good or unusually bad, the market will ignore it as readily as it did the sub-par January result. From now on, I think the market will be pleased at continuing good figures from the Employment Situation, but will react with a yawn. It will only react in two cases–and badly in both: if the numbers are very weak for two or three months in a row, or in the (unlikely for a while, in my view) event they’re so strong they suggest the Fed will act to normalize its extremely stimulative interest rate policy.