Thursday, March 21, 2013

Construction Boom

Employers created a surprisingly large number of jobs in February, but it wasn't strong enough to prevent many Americans from leaving the workforce.
Nonfarm payrolls grew by 236,000, the Labor Department said Friday, well above forecasts of 171,000. The unemployment rate dropped to a 4-year low 7.7%, beating expectations for a smaller dip to 7.8%.
But some of that improvement was due to fewer people looking for work. The household survey that determines the jobless rate found that 170,000 more people were working, while 130,000 dropped out.
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The labor participation rate fell to 63.5% from 63.6%, returning to the low reached last summer and matching the lowest level since 1981. If it had stayed at the pre-recession rate of 66%, unemployment would be 10.7%.
The aging population may have accounted for most of the latest labor force drop, said John Canally, an economist at LPL Financial. The trend is here to stay.
"It's more longer term than cyclical at this point," he said. "It's sort of the new reality for the job market.
The S&P 500 stock market gauge rose modestly on the jobs report as well as China trade data suggesting improving global demand.
The 10-year Treasury yield rose 6 basis points to 2.05%, its highest close in 11 months. That may reflect concerns that an improving economy could eventually spur the Federal Reserve to curb its heavy bond-buying efforts.
Some Fed members are increasingly worried about quantitative easing. But Chairman Ben Bernanke and his deputy Janet Yellen have made it clear they strongly support the current easy-money stance.
January's payroll increase was revised down by 38,000, and December's was readjusted up by 23,000. That left average monthly job growth over November-February at about 205,000.
But automatic federal spending cuts that began March 1 will result in 750,000 lost jobs this year, the Congressional Budget Office recently estimated. The sequester's impact is on top of the burden of higher payroll taxes and tax rates on high earners.
The sequester makes February's hiring less impressive, Canally said. The job market is improving, but not as quickly as the data might suggest.
"The markets are saying this is not a game-changer," he said.
But the housing recovery is giving a bigger boost to jobs. Construction payrolls shot up 48,000, the best in nearly six years. Manufacturers added 14,000, the most in seven months, but far short of year-ago gains.
Health care added 39,100, continuing a trend as a top job creator. Professional services grew by 26,800 and leisure by 24,000.
Retailers hired 23,700 more, after adding 29,000 in January and 147,800 leading up to the holidays. The retail workweek also increased somewhat, from January's dive to a downwardly revised 30 hours, a three-year low.
Retailers and other low-wage employers may be shifting to part-time labor to avoid ObamaCare coverage mandates. Workweeks overall were up from January but generally little changed from a year ago, including those for leisure and hospitality.
Annual growth in nominal wages for production workers reached 2% again after a year and a half of crawling below that pace. Pay gains will be especially important this year as consumers face higher payroll taxes.
Head winds from tighter fiscal policy should send monthly job creation below 200,000 for the next three or four months, said Mike Dueker, chief economist at Russell Investments.
But February's gain still brightened his view for the first half of 2013, which he had seen as significantly weaker than the latter half.
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