US Data Flash
US Employment Report (February)
2021-03-05T18:37:09
  • Big payroll headline but mixed details

  • Storms and inclement weather held back gains in February—a plus for March report

  • Reported unemployment edged to 6.2% from 6.3%   

The employment data continued to show big monthly impacts due to the pandemic and provided some very fuzzy signals about the state of the labor market. Overall payrolls rose much more than expected in February, up 379,000 (consensus 198,000, NWM -35,000), led by a 355,000 rebound in the leisure and hospitality series as COVID-related restrictions eased in some parts of the country.  Meanwhile, the unemployment rate slipped from 6.3% to 6.2% in February, as employment rose 208,000 while the labor force edged up just 50,000. However, when factoring in workers who have left the labor force since the start of COVID, as well as misclassification errors, the unemployment rate is closer to ~10% (more below).

The rebound in leisure and hospitality payrolls reversed two-thirds of the drop in December (-498,000) and January (-25,000), and now leaves the level down "only" 20.4% from last February's level. With additional areas loosening some of the renewed restrictions put back in pace at the turn of the year, we should see in-person services recover even more in coming monthsMeanwhile, other industries were mostly flat on balance in February (see chart), partly depressed by February winter storms and colder temperatures. Nonfarm payrolls remain nearly 9.5 million below their peak last February, which represents a decline of 6.2% y/y.  Even with the large gain in February, nonfarm payrolls in this morning’s report were roughly equal to their level in late 2015 – still more than five years ago. 

Even with February bounce, payrolls have a long way to go from being recovered. In level terms, overall payrolls were down 9.475 million in February (troughed at -22.362 million in Apr 2020 vs Feb 2020 peak); ex leisure and hospitality -6.024 mil (troughed at -14.138 in Apr 2020 vs Feb 2020 peak); and leisure and hospitality -3.451 mil (troughed at -8.224 mil in Apr 2020 vs Feb 2020 peak).

Source: Bureau of Labor Statistics, NatWest Markets


 

In percentage terms, overall payrolls were down 6.2% y/y in February (troughed at -14.7% in Apr 2020 vs Feb 2020 peak); ex leisure and hospitality -4.4% y/y (troughed at -10.4% in Apr 2020 vs Feb 2020 peak); and leisure and hospitality -20.4% y/y (troughed at -48.6% in Apr 2020 vs Feb 2020 peak).  

Source: Bureau of Labor Statistics, NatWest Markets



Payrolls Growth by Super Sector (000s)

Super sector

12MMA

6MMA

3MMA

Dec- 20

Jan- 20

Feb- 21

Total Nonfarm Payrolls

-790

317

80

-306

166

379

      Total private

-674

421

94

-274

90

465

Mining and logging

-8

0

-3

0

0

-8

Construction

-26

20

-4

47

1

-61

Manufacturing

-47

28

14

35

-14

21

Wholesale trade

-22

15

11

15

14

4

Retail trade

-30

42

39

30

46

41

Transportation & warehousing

-14

31

-18

-43

-14

4

Utilities

-1

0

0

-1

1

0

Information

-21

8

5

9

10

-3

Financial activities

-9

16

5

18

1

-5

Professional & business services

-64

131

102

159

85

63

Education

-32

-12

0

-67

70

-2

Health services

-76

42

-4

39

-96

46

Leisure & hospitality

-288

84

-56

-498

-25

355

Other services

-37

17

2

-16

12

10

      Government

-116

-105

-14

-32

76

-86

  Source: BLS, Natwest Markets  

February payrolls and hours worked were probably lowered by snow storms and by a swing toward colder than usual temperatures. Indeed, it looks like weather played a sizable role despite the impressive gain, construction payrolls fell 61,000 and the workweek fully reversed the prior month's increase, to 34.6 in February from 34.9 in January and 34.7 in December. Hours in the construction sector was down a sharp 1.1pt to 38.2 hours.   

If not for the winter storms which hit during the employment survey reference week (and carried over throughout much of the month), payrolls would have been stronger last month. In February, temperatures were 5.1 degrees (Fahrenheit) below normal after having been 1.1 degrees above normal in November.  

Source: National Climatic Data Center, Haver Analytics, and NatWest Markets


    

We estimate that in the past Februarys, a 6.9 degree swing in the deviations from normal temperatures (as this year) has been associated—very roughly—with about a 20,000 drag on private payrolls.  

Source: National Climatic Data Center, Haver Analytics, and NatWest Markets


  

Household survey data on those not at work because of bad weather showed a not seasonally adjusted surge of 721,000 between January and February; the 10-year average swing was -85,000. We do not take the 769,000 difference as a literal indicator of the impact on payrolls, especially given the abnormal conditions in the labor market during COVID, but it does appear consistent with a significant drag on jobs in February, and implies a decent rebound in several areas as weather starts to return toward more normal seasonal trends.   

  

Non-agricultural workers not at work due to bad weather
Source: BLS and NatWest Markets

Monthly change (000s)

Nov

Dec

Jan

Feb

Mar

Apr

2009-10

-15

151

18

772

-896

-107

2010-11

3

139

707

-491

-244

-89

2011-12

19

67

79

-28

-82

-45

2012-13

347

-285

148

5

-120

-21

2013-14

7

236

-11

339

-453

-85

2014-15

121

-5

53

127

-146

-81

2015-16

68

28

144

-41

-36

-147

2016-17

-219

140

236

-238

7

-83

2017-18

48

36

376

-237

-100

-26

2018-19

-69

58

78

125

-253

-59

2019-20

66

14

114

-36

-47

-108

2020-21

29

51

65

721

  

  

10-yr avg

39

43

192

-48

-147

-74

 
Other secondary indicators in the establishment survey were mostly as we expected. Average hourly earnings rose two-tenths of a percent, and January was revised down to 0.1% (from 0.2%),  which left the year-over-year growth rate at an exaggerated 5.3%.      

Average Hourly Earnings

Source: Bureau of Labor Statistics, NatWest Markets

All Employees

AHE ($)

AHE (m/m%)

Annualized change

Super sector

Feb-21

Dec-20

Jan-21

Feb-21

3 month

6 month

12 month

Total private

30.01

1.0%

0.1%

0.2%

5.5%

3.7%

5.3%

Mining and logging

34.84

0.6%

0.1%

0.4%

4.4%

0.2%

1.2%

Construction

32.33

0.4%

0.4%

0.3%

4.6%

3.2%

3.1%

Manufacturing

29.06

0.0%

0.3%

-0.1%

1.0%

0.8%

2.9%

Wholesale trade

33.12

0.3%

0.3%

0.5%

4.5%

3.9%

4.1%

Retail trade

21.23

0.9%

0.1%

-0.6%

1.5%

0.4%

5.2%

Transportation and warehousing

25.72

0.9%

-0.3%

0.3%

3.8%

2.5%

2.7%

Utilities

44.09

-0.5%

0.2%

-0.3%

-2.5%

0.0%

3.9%

Information

44.77

-0.3%

0.4%

0.7%

3.4%

3.5%

4.2%

Financial activities

39.73

0.7%

0.5%

1.2%

10.1%

8.7%

7.8%

Professional and business services

35.88

0.4%

0.4%

0.4%

5.1%

3.4%

4.2%

Education and health services

29.27

2.0%

-0.5%

-0.1%

5.8%

4.4%

4.9%

Leisure and hospitality

17.28

0.4%

0.3%

0.4%

4.5%

2.6%

2.2%

Other services

27.10

0.6%

0.3%

0.7%

6.3%

3.9%

5.9%

Source: BLS,  NatWest Markets:   Note: Monthly Contribution may not add up precisely due to rounding

  

Unemployment Rate. The unemployment rate slipped a tenth of a percent, but the improvement was concentrated in the volatile youth categories. By race, the overall black unemployment jumped back up to 9.9% from 9.2% in January, while the jobless rate for both whites (5.6%) and Hispanics (8.5%) were down a tick. Asian unemployment sank to 5.1% from 6.6%. On a more positive note, the composition of unemployment by reason for joblessness improved a bit – the number of unemployed workers who had lost their jobs declined, which is consistent with the modest down trend in jobless claims, while the number of new entrants climbed a little. (The compositional data are volatile on a month-to-month basis, so we wouldn't read too much into monthly movements, but the same is true for the age distribution data. This may all be noise, but the point is that there was some slightly positive noise to go along with the negative noise.)  

Other household survey numbers were generally positive. As expected, the labor force participation rate was flat at 61.4%, aided by the increase in new entrants. The broad U6 unemployment rate was steady after falling in each of the prior nine months. The overall unemployment rate is down just 0.5% over the past two months, and the U6 rate is down 0.6% over the same period. Despite the drop, there is still an enormous amount of excess slack in joblessness.

The official reported unemployment rate (6.2%) is very misleading and clearly understates the current level of unemployed, as the real unemployment rate is much higher if you include people that have left the labor force.  As mentioned at 61.4% the labor force participation rate was steady on the month but still almost down two percentage points from where it was heading in COVID (63.3% in February 2020). With many new jobless people not included because they have not actively started searching for a new job yet, the official jobless rate is understated. All else equal, every one-point decline in the participation rate reduces the unemployment rate by around 1 1/2 points or so, so that a rough 2-point net decline in the participation rate is worth three points on the unemployment rate. Adjusting for that impact, as well as the misclassification issue (see the BLS quote below), the overall unemployment rate (U3) may be as high as 9.7% in February 2021 versus only 3.5% in February 2020, so while today's drop is a small positive joblessness remains extremely high. 

According to the BLS Commissioner, "As in previous months, some workers affected by the pandemic who should have been classified as unemployed on temporary layoff in February were instead misclassified as employed but not at work. Since March 2020, BLS has published an estimate of what the unemployment rate would have been had misclassified workers been included among the unemployed. Repeating this same approach, the seasonally adjusted February unemployment rate would have been 0.5 percentage point higher than reported.”   

Unemployment Rate

Source: Bureau of Labor Statistics, NatWest Markets


    

Employment Situation

Seas. Adj.

Oct

Nov

Dec

Jan

Feb

Nonfarm Payroll Survey

 

 

 

 

 

    Employment (chg, thous.)

+680

+264

-306

+166

+379

       Private Sector (chg, thous.)

+954

+359

-274

+90

+465

Workweek, Private

34.8

34.8

34.7

34.9

34.6

    Workweek, Manufacturing

40.4

40.3

40

40.4

40.2

Aggregate hours, Priv (% chg)

+0.8

+0.3

-0.5

+0.7

-0.5

    Aggregate Hours, Mfg (% chg)

+0.5

+0.1

-0.5

+0.9

-0.3

Avg Hourly Earnings, Priv (% chg)

+0.1

+0.3

+1.0

+0.1

+0.2

Household Survey

 

 

 

 

 

    Unemployment Rate (%)

6.9

6.7

6.7

6.3

6.2

    Employment (chg, thous.)

+2126

+140

+21

+201

+208

    Labor Force (chg, thous.)

+640

-182

+31

-406

+50

Source:  BLS



Thanks to Deepika Dayal and Garima Ahuja for their contribution to this publication.

  


Please click here to find all of NatWest Markets’ Strategy and Sales commentary/ideas.

You can also find out more about our electronic offering and credentials for Rates here and for FX here.



Invitation to consider a derivatives transaction

This communication is prepared by the sales and trading desk or desk strategists and is marketing material, desk strategy and/or trader commentary. It does not constitute research. This material constitutes an invitation to consider entering into a derivatives transaction under U.S. CFTC Regulations 1.71 and 23.605, where applicable, but is not a binding offer to buy/sell any financial instrument. The views of the author may differ from others at NatWest Markets Plc, NatWest Markets N.V. and/or NatWest Markets Securities Inc. (collectively “NatWest Markets”).





Note that the text above is subject to the disclaimer(s) accessible if you Click Here
Authors
Image
Kevin Cummins
Chief US Economist
Stamford
+1 2038972818

Contributors
{{contributor-span-repeater}}

If you wish to discuss the content of this article further, please contact your usual sales person. Reminder, clients of Natwest Markets NV should reach out to their relevant NV sales person.


"Related Articles" Coming Up Next..
  • 1. BoE Inflation Report - Reinforcing Policy Neutrality
  • 2. BoE Inflation Report - Reinforcing Policy Neutrality
  • 3. BoE Inflation Report - Reinforcing Policy Neutrality
  • 4. BoE Inflation Report - Reinforcing Policy Neutrality