February was one of those puzzling months when the unemployment rate and the payrolls told different stories: unemployment ticked up by a tenth of a percentage point to 6.7 percent, while the economy added 175,000 jobs, exceeding the consensus predictions of 139,000 to 149,000 jobs.
February’s gains are below the 189,000 average monthly gains seen over the past year, but it’s worth noting, as Justin Wolfers reminded us last month, that the margin of error for the establishment survey that totals these payrolls is about 90,000 jobs.
The number of jobless was a smidge higher, with 223,000 more people unemployed than in January. The reason: the labor force grew and more people couldn’t find jobs. But the labor force participation rate, according to the Bureau of Labor Statistics, held steady from last month. (For much of last year, unemployment declined simply because people were dropping out of the labor force).
All told, I'm mildly more optimistic about the recovery after this jobs report. Seems to suggest a continuing rather than stalling recovery.
— Justin Wolfers (@JustinWolfers) March 7, 2014
This report is being heralded as fairly good news. Our own Solman Scale would agree. Our “U-7” calculation of unemployment, which adds to the officially unemployed everyone who says they want a job and can’t find one and those who are employed part-time for economic reasons, came in at 14.58 percent. Our expanded pool of folks looking for a job is the lowest its been since we started calculating it: 23,590,000 people.
But there’s a more sobering number in this report, too. The number of long-term unemployed increased by 203,000. There are now 3.8 million people who have been unemployed for 27 weeks or longer.
David Wessel puts the long, long-term unemployed population in perspective:
BLS: 2.76 million have been out of work for a full year or more, and are still looking for work. As many people as live in Chicago.
— David Wessel (@davidmwessel) March 7, 2014
If those people were counted in the labor force, the unemployment rate would be much higher, as the left-leaning Economic Policy Institute demonstrates in this graph:
This is your monthly reminder that the unemployment rate is vastly understating weakness in today's labor market. pic.twitter.com/of9IxYRTL7
— Economic Policy Inst (@EconomicPolicy) March 7, 2014
And of course, part of the reason there’s a sigh of relief about February’s report is because January’s and December’s payroll numbers were so low. Initial reports had firms posting 74,000 and 113,000 jobs in December and January respectively. (Those figures have been collectively revised upward by 25,000.)
One argument is that the icy snap and quirky seasonal adjustments are the culprits behind those weak gains. But as the BLS notes (see question 8), weather is more likely to influence hours worked than aggregate employment. Individuals would have to be off work without pay for the entire pay period to affect payroll numbers. In the household survey, which determines the unemployment rate, workers who miss work because of weather during the reference week are counted as employed, regardless of whether they were paid. Indeed, 6.9 million people reported working part-time because of weather in February — the highest February number since it was first calculated in 1978.
And we may not be out of the cold yet. The New York Times’ Nelson Schwartz writes that some economists aren’t expecting so-called “clean data” until spring.
Regardless, February’s decent report suggests the Fed will continue tapering on course, most likely announcing another $10 billion drawdown of monthly bond purchases at their Open Market Committee meeting later this month.
Economists always caution not to read too deeply into any one month’s report. For more about why we shouldn’t obsess too much over these statistics, watch Paul Solman’s conversation with Zachary Karabell, author of “The Leading Indicators: A Short History of the Numbers That Rule Our World,” and read Karabell’s telling of the origins of the BLS’ monthly report.