March 4, 2011
Sheraz Mian
Director of Research
We finally got a strong Nonfarm Payroll report this morning. Despite the headline number coming inline with expectations, today’s report should help the market sustain its cheery mood from yesterday.
The Bureau of Labor Statistics reported the addition of 192,000 jobs in February and a positive revision to the January number. Private sector jobs totaled an impressive 222,000, partly offset by losses on the government side. The average work-week remained unchanged, while the average hourly earnings ticked up.
Importantly, the unemployment rate dropped to 8.9% from 9% last month; the expectations were for the unempoyment rate to go up to 9.1%. This is the third straight month that the unemployment rate has ticked down, for a combined 0.9%. At 8.9%, the unemployment rate has dropped to its lowest level in two years.
The monthly Nonfarm payroll was the only major economic report that was not capturing the improving trends in the U.S. labor market. All other indicators had been showing steady improvements for weeks now. The Jobless Claims numbers had been consistently coming down, the employment components of the ISM indices had been in record territory, and the ADP report had been showing solid monthly gains.
Yesterday’s strong Jobless Claims report was just the latest in this trend. Today’s report confirms that the pace of job creation has indeed moved to a new level.
The one lingering question pertains to the staying power of what the labor market did in February. Is last month’s impressive number just a one-time phenomenon — a payback for the weather-induced losses in January? Or is it the start of a sustainable labor market turnaround?
We will know the answer to that question over the coming months, but I am reasonably confident that the labor market has turned the corner. This is borne by the positive momentum in all key economic indicators.
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