Fabulous Employment Data Show US Growth Accelerating

J: On March 9 the BLS dropped several bombshells on analysts and economic forecasters. The first was the totally unexpected news that nonfarm payroll jobs shot up by 313,000 on a seasonally adjusted basis in February from January. That was the biggest one-month increase since July 2016 and was in addition to upward revisions of 15,000 more jobs in December and 39,000 in January. That brought the average for the past three months up to 242,000 a month. That is very strong growth.

It was up 2,281,000 such jobs from a year earlier or 1.6 percent. As the chart shows, the total number of such jobs was 145,177,000, yet another record.

There were more bombshells in the total employment numbers. These include agricultural workers and the self-employed. Total employment rose by 785,000 people, the most since September 2017.

Normally, that large an increase would have caused a significant drop in the unemployment rate, but that remained at 4.1 percent for the fifth consecutive month. The reason was that the civilian labor force shot up by 806,000 people, the biggest single gain (excluding months with major temporary hiring of Census workers) since June 1983. That raised the labor force participation rate to 63.0 percent.

We should not expect such big gains in the participation rate and thus the number of people in the labor force to happen every month. We ought to see the unemployment rate going well below 4.0 percent later this year. That will be the lowest we’ve experienced since 1969.

Such low unemployment rates ought to keep the FOMC raising the target for the Federal Funds rate at every other meeting both this year and next. Their first opportunity will be at the March 20-21 meetings. They’ll announce their decision at 2pm EDST on March 21. Market participants will be shocked if they don’t move the target to 1.50-1.75 percent from the current 1.25-1.50 percent.

To the degree that the labor force participation rate keeps rising or even stabilizes at 63.0 percent, we can see good employment growth with little pressure on wages. That would allow the expansion to keep going at a relatively strong pace for some time to come. (L: Sigh…who wants little pressure on wages? It does get annoying that macroeconomics always favors business success.)

The next “Employment Situation” report will be released by the BLS on Friday, April 6. Be watching to see what surprises that one may contain.