February Jobs Report: Labor Market Growth Expected to Slow Down
The highly anticipated February jobs report is set to be released on Friday, and economists are predicting that employment gains will fall short of January’s impressive numbers. According to estimates from FactSet, US employers are expected to have added around 200,000 jobs last month, a significant drop from the 353,000 job gains reported in January.
However, despite the expected decline, February’s job growth would still be considered substantial and would continue the trend of a historically strong labor market. It is important to note that January’s exceptional job gains were influenced by various factors such as weather conditions, seasonal adjustments, and fewer layoffs of seasonal workers compared to previous years.
Julia Pollak, the chief economist at ZipRecruiter, believes that Friday’s jobs report could provide a more accurate reflection of the current state of the labor market compared to recent months. She suggests that October and November reports were affected by strikes and returning workers, while December and January likely overstated growth.
The Bureau of Labor Statistics data shows that the labor market is expected to cool down in 2024 compared to the post-pandemic recovery years of 2021 and 2022. Despite this, February’s projected employment gains would still surpass historical averages and the rate of job growth needed to keep up with population growth.
If the job gains align with expectations and unemployment remains steady at 3.7%, it would mark the continuation of the fifth-longest labor market expansion on record and maintain a streak of sub-4% unemployment not seen since the Nixon administration.
Ron Hetrick, a senior economist for labor analytics firm Lightcast, acknowledges that people may perceive the current situation as terrible due to unrealistic expectations set by the exceptional growth experienced in 2021 and 2022. However, he emphasizes that the overall economy is still performing well.
Key Metrics to Watch in the Jobs Report
Beyond the headline numbers, there are several important metrics to pay attention to in Friday’s report. One of them is wage growth, which sharply rose in January, with average hourly earnings increasing by 0.6% from December and reaching a 4.5% annual growth rate. Economists expect wage growth to moderate slightly but remain at a level that may not satisfy the Federal Reserve.
Another metric to watch is the average workweek, which dropped to its lowest level since March 2020 in January. This decrease was likely due to extreme weather conditions affecting certain industries. If the average workweek continues to shrink, it could indicate a weakening of economic activity.
Additionally, economists are interested in seeing if the employment gains in January, which were spread across various industries including construction and manufacturing, were merely a statistical anomaly or a broader trend.
Labor force participation rates will also be closely monitored. These rates have been declining due to demographic changes and an aging population, and they have not yet returned to pre-pandemic levels. The imbalance between worker supply and demand has been a concern for economists and the Federal Reserve.
Overall Labor Market Trends
Recent economic data supports the notion that the US labor market is cooling but remains strong. ADP reported that private-sector employers added an estimated 140,000 jobs in February, slightly below expectations but still indicating steady hiring.
The Job Openings and Labor Turnover Survey (JOLTS) for January showed a decrease in job openings, hiring activity, quits, and layoffs. However, the number of job openings remains significantly higher than pre-pandemic levels, indicating robust labor demand.
While layoff announcements have increased compared to last year, they are still relatively low across the economy. Real-time data such as initial and continued jobless claims suggest that layoff activity remains minimal.
Unemployment claims have remained stable, with first-time claims for unemployment benefits unchanged from the previous week. Continuing claims, which indicate the ease of finding jobs for unemployed workers, have seen a slight increase but remain at levels comparable to mid-November 2023.
As the February jobs report is released, economists and analysts will closely examine the data to gain a clearer understanding of the current state of the labor market. While expectations suggest a decline in employment gains compared to January, the overall labor market remains strong and continues to outperform historical averages.