February Payrolls Smash Expectations, Surge To 242,000 Even As Hourly Earnings Post Unexpected Drop

If bulls were expecting a February payrolls miss, they did not get it when moments ago the BLS reported that nonfarm payrolls surged by 242K in the past month, smashing expectations of 195K, with the January and December prints both revised higher by 21K and 9K respectively. The unemployment rate at 4.9% printed unchanged from the prior month and as expected. According to the BLS, over the  past 3 months, job gains have averaged 228,000 per month.

 

The move higher in jobs was mostly driven by minimum wage jobs in healthcare (+57,000), retail (+55,000), and food service professions which rose by 40,000. This explains why for yet another month, wage growth was not only not there, but with a -0.1% decline after the January minimum wage hike induced bounce, posted a drop of -0.1%, which was the first drop since December 2014.

 

As shown in the chart below, the February hourly earnings drop was only the 6th drop in the past decade.

Worse, the average weekly earnings tumbled from $878.15 to $872.04, which rising just 1.7% Y/Y, was the weakest increase since February 2014.

 

There was good news in the participation rate, which ticked up solidly from near 30+ year lows of 62.7% to 62.9%, the highest since May 2015, as people not in the labor force declined by 374K.

 

More details from the full report:

Total nonfarm payroll employment increased by 242,000 in February. Job growth  occurred in health care and social assistance, retail trade, food services  and drinking places, and private educational services. Mining employment  continued to decline.

Health care and social assistance added 57,000 jobs in February. Health care employment increased by 38,000 over the month, with job gains in ambulatory health care services (+24,000) and hospitals (+11,000). Over the past 12 months, hospitals have added 181,000 jobs. In February, employment rose by 19,000 in social assistance, mostly in individual and family services (+14,000).

Retail trade continued to add jobs in February (+55,000). Employment rose in food and beverage stores (+15,000) and other general merchandise stores (+13,000). Retail trade has added 339,000 jobs over the past 12 months.

Food services and drinking places added 40,000 jobs in February. Over the year, employment in the industry has grown by 359,000.

Employment in private educational services rose by 28,000 in February, after edging down by 20,000 in the prior month.

Construction employment continued to trend up in February (+19,000), with a gain of 14,000 in residential specialty trade contractors. Employment in construction was up by 253,000 over the past 12 months, with residential specialty trade contractors accounting for about half of the increase.

Employment in mining continued to decline in February (-19,000), with job losses in support activities for mining (-16,000) and coal mining (-2,000).Since a recent peak in September 2014, mining has shed 171,000 jobs, with more than three-fourths of the loss in support activities for mining.

Employment in other major industries, including manufacturing, wholesale trade, transportation and warehousing, financial activities, professional and business services, and government, showed little change over the month.

The average workweek for all employees on private nonfarm payrolls declined by 0.2 hour to 34.4 hours in February. The manufacturing workweek was unchanged at 40.8 hours, and factory overtime was 3.3 hours for the third month in a row. The average workweek for production and nonsupervisory employees on private nonfarm payrolls edged down by 0.1 hour to 33.7 hours. (See tables B-2 and B-7.)

In February, average hourly earnings for all employees on private nonfarm payrolls declined by 3 cents to $25.35, following an increase of 12 cents in January. Average hourly earnings have risen by 2.2 percent over the year. In February, average hourly earnings of private-sector production and nonsupervisory employees were unchanged at $21.32.

The change in total nonfarm payroll employment for December was revised from +262,000 to +271,000, and the change for January was revised from +151,000 to +172,000. With these revisions, employment gains in December and January combined were 30,000 more than previously reported. Over the past 3 months, job gains have averaged 228,000 per month.