A Chill in U.S. February Employment Numbers, Canada’s Performance Perkier
February’s Employment Situation report from the Bureau of Labor Statistics delivered the kind of U.S. total employment change, month to month, that we have become unaccustomed to seeing. Net jobs growth was quite weak, at only +20,000. It’s been 17 months since the figure was comparably low, +18,000 in September 2017.
Over the last several years, the month-to-month jobs gain has usually been at least +175,000, often exceeding +200,000. In the first month of this year, January, it was +311,000.
On the brighter side, the unemployment rate in the latest month improved to 3.8% from 4.0% in the prior period.
There was only one major industrial sector with a substantial pick-up in nominal number of jobs in January, ‘professional and business services,’ +42,000. The staffing increases were evenly and widely spread among segments of the sector (e.g., accounting, design, computer, and help-wanted services).
‘Education and health services’ added just 4,000 jobs, but that was because education services declined by -19,000 jobs. ‘Health care and social assistance’ wasn’t shy about hiring, lifting its combined payroll by +23,000.
There were minimal employment changes in ‘retail’ (-6,000), ‘transportation and warehousing’ (-3,000), ‘information’ (0), ‘leisure and hospitality’ (also 0), ‘manufacturing’ (+4,000) and ‘financial activities’ (+6,000).
In ‘construction,’ the total jobs count fell by -31,000, with the biggest bites being taken out of ‘heavy and civil engineering construction’ (-13,000) and ‘specialty trade contractors’ (-14,000). Within subcontracting work, residential specialists made the deepest personnel cuts (-9,000).
Housing starts dipped towards the end of last year and are still in a funk. ‘Permits’ numbers are more upbeat, and with an upwards climb in interest rates being put on hold, the laying of residential foundations is set for improvement once again.
The chill in the labor numbers shouldn’t cause anyone to stress too much just yet. U.S. ‘real’ (i.e., after adjustment for inflation) gross domestic product (GDP) growth has continued to be quite positive. Q4 2018 was +2.6% (annualized), maintaining the momentum achieved in the earlier three quarters of the year, i.e., +3.4% in Q3; +4.2% in Q2; and +2.2% in Q1.
Construction’s not seasonally adjusted (NSA) unemployment rate in February of this year was 6.2%, down from 6.4% in January and below February 2017’s level of 7.8%. But construction’s place at the top of the leader board for year-over-year jobs growth has come to an end. Instead, ‘transportation and warehousing’ (+3.6%) has taken over first place. The percentage changes for all sectors are set out in Graph 1.
Graph 1: Y/Y Jobs Growth, U.S. Total Industry & Major Subsectors −
February 2019 (based on seasonally adjusted payroll data)
Construction has eased back to +3.1% year-over-year jobs growth after achieving a peak of +6.1% (December 2014) in the years since the Great Recession.
Also noteworthy is how earnings growth stumbled in February (see Graph 2). For production and non-supervisory personnel, year-over-year compensation rates for ‘all jobs’ were +3.5% hourly and +2.9% weekly. For construction within ‘all jobs’, the pay check advances were +3.3% hourly and a nearly stalled +1.2% weekly.
Graph 2: Average Weekly Earnings Y/Y - 'All Jobs' and Construction
Speaking of ‘stalling’, Canada’s GDP growth in Q4 2019 was a disappointing +0.4%. Earlier in 2018, the quarter-to-quarter GDP performances (annualized) had been sparkier: +1.3% in Q1; +2.6% in Q2; and +2.0% in Q4.
The Bank of Canada has been cautiously following the Federal Reserve’s lead in upping interest rates. But not only will the Bank of Canada likely hold fast on further yield hikes, there is an increasing possibility that it may shift into reverse.
Statistics Canada’s February jobs numbers were quite buoyant, however, at +56,000. (Much of Canada’s GDP trouble centers in foreign trade, where mounting deficits are dragging down National Income’s bottom line.)
Employment in Canadian manufacturing rose by +4,000 jobs in February but in construction, it retreated by -7,000. The year-over-year record of employment in construction in Canada is an anemic +0.5%. At least, that’s better than manufacturing’s -0.6% year over year.
To Canada’s credit, though, total jobs in the country are +2.0% year over year and ‘services’ jobs are +2.4%. The comparable percentage changes for the U.S. are +1.7% and +1.8%.
Among the provinces, B.C. has the lowest unemployment rate, 4.5%; tied for second are Quebec and Manitoba (5.3%). The national jobless rate in February was 5.8%, the same as in January.