Nonfarm employment barely grew in February, adding a scant 20,000 jobs, far less than expected, after adding 311,000 and 227,000 in January and December respectively. Yet, the unemployment rate decreased to 3.8 percent and hourly wages posted their best annual gain in nearly a decade. Nonfarm employment is based on a survey of employers while unemployment is drawn from a household survey. In recent months, results from these two surveys had moved in opposite directions—strong employment gains but rising unemployment. February’s results provide some correction to this divergence. Both of these broad measures were likely affected by the partial Federal government shutdown and severe weather.
Averaging over the last three months results in a solid 186,000 job growth, which amounts to double its underlying demographic trend. (Approximately 100,000 people enter the labor market each month.)
While a wide range of industries posted growth in January, these same industries sharply slowed in February, with several sectors losing jobs. Employment in construction declined by 31,000 in February, offsetting a 53,000 increase in January; education lost 18,000 workers; and transportation and warehousing, retail trade, mining, and government also shed employment. Job gains occurred across other sectors in February including professional and business, health care, wholesale trade. and manufacturing. Professional and business added 42,000 jobs, health care gained 21,000 jobs, wholesale trade added 11,000 jobs, and manufacturing gained 4,000 jobs.
Despite limited nonfarm jobs growth, the unemployment rate decreased to 3.8 percent in February, from 4.0 percent in January. Among the unemployed, the number of job losers and person who completed temporary jobs (including people on temporary layoff) declined by 225,000. This decline reflects, in part, the return of federal workers who were furloughed in January due to the partial government shutdown. During the month, the labor force participation rate remained steady at 63.2 percent. The employment rate—or employment-to-population ratio (EPOP or the percentage of adults with jobs)—remained steady as well at 60.7, a high for the recovery.
The tighter labor market is showing some dividends in wage growth. The average hourly wage is up 3.4 percent over the last year; over the last three months (December, January, and February), the annualized rate was up 3.3 percent. With the core rate of inflation at 2.2 percent, increased hourly wages translate to modest real wage gains.
In sum, this is a mixed jobs report. The pace of job growth that began eight years ago is continuing, with the economy adding a total of 2.5 million jobs over the past twelve months. This growth rate is pulling more workers into the labor market, which is now tight enough to produce real wage gains. Finally, these latest numbers come with an asterisk. Payrolls were likely distorted by the effects of the government shutdown and severe weather and these numbers are likely to be revised upward. Whether this report signals a slowing economy will need at least another month of data.
The full BLS press release on the February 2019 employment situation can be accessed in the link below:
The next employment situation report for March 2019 will be released on Friday, April 5, 2019.
Real gross domestic product(GDP) increased at an annual rate of 2.6 percent in the fourth quarter of 2018 (table 1), according to the "initial" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 3.4 percent. Due to the recent partial government shutdown, this initial report for the fourth quarter and annual GDP for 2018 replaces the release of the "advance" estimate originally scheduled for January 30th and the "second" estimate originally scheduled for February 28th. The increase in real GDP in the fourth quarter reflected positive contributions from personal consumption expenditures (PCE), nonresidential fixed investment, exports, private inventory investment, and federal government spending. Those were partly offset by negative contributions from residential fixed investment, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.
The deceleration in real GDP growth in the fourth quarter reflected decelerations in private inventory investment, PCE, and federal government spending and a downturn in state and local government spending. These movements were partly offset by an upturn in exports and an acceleration in nonresidential fixed investment. Imports increased less in the fourth quarter than in the third quarter.
Real GDPincreased 2.9 percent in 2018 (from the 2017 annual level to the 2018 annual level), compared with an increase of 2.2 percent in 2017 (table 1). The increase in real GDP in 2018 primarily reflected positive contributions from PCE, nonresidential fixed investment, exports, federal government spending, private inventory investment, and state and local government spending that were slightly offset by a small negative contribution from residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.
The acceleration in real GDP from 2017 to 2018 primarily reflected accelerations in nonresidential fixed investment, private inventory investment, federal government spending, exports, and PCE, and an upturn in state and local government spending that were partly offset by a downturn in residential investment.
The BEA release can be viewed at the pdf below
On January 22, 2019, the Emergency Board met and approved a new consensus revenue forecast as presented by the State and Legislative economists. The consensus forecast was updated with new monthly and cumulative targets that were used to evaluate January receipts and will be used as the measure through the rest of the fiscal year.
Secretary of Administration Susanne Young released January FY 2019 revenue results for the General Fund, Transportation Fund, and Education Fund on February 15, 2019. Revenue activity for the month of January was ahead of target for the G-Fund and virtually on-target for the T-Fund and E-Fund. Net receipts amounts for the G-Fund were primarily influenced by receipts activity in Personal Income Tax and by better than expected receipts activity in the Corporate Income Tax component. In the T-Fund, receipts activity for all components, except for the “Other Fees” component, were slightly ahead of target. The E-Fund finished January slightly below target due to Sales & Use Tax receipts activity, which may be reflecting still lagging payment on liabilities from new e-commerce payers.
The Consumer Price Index report, released by the U.S. Bureau of Labor Statistics, provides the latest evidence that inflation is in line with the Federal Reserve Bank’s wait-and-see approach to its rate-setting policy. The Consumer Price Index for all urban consumers (CPI-U) was unchanged in January. Over the last 12 months, the all items index increased by 1.6 percent before seasonal adjustment.
The energy index declined for the third consecutive month, offsetting increases elsewhere. Overall the energy index fell by 3.1 percent, as did gasoline (down 5.5%), fuel oil (down 1.3%), and the other energy index components. Food indexes—food at home and food away from home—increased by 0.2 percent in January.
Core inflation—all items minus food and energy—rose 0.2 percent in January for the fifth consecutive month. The Fed’s preferred gauge has held steady at around its 2.0 percent price growth target, a “healthy for the economy” level. Indexes for shelter, apparel, medical care, recreation, and household furnishings and operations each rose; in contrast, airline fares and motor vehicle insurance declined during the month.
The all items index increased 1.6 percent over the last 12 months ending in January; marking the smallest increase since the period ending in June 2017. The energy index decreased by 4.8 percent while the food index increased by 1.6 percent over the last 12 months. Core inflation rose 2.2 percent over the last 12 months. The Fed has pointed to muted inflation pressures in recent weeks as one reason for the pause in their raising of short-term rates.
The full press release can be found via the link below.
Next release is Tuesday, March 12, 2019, for the February 2019 Consumer Price Index.
Lisa Ventriss, President of Vermont Business Roundtable (VBR) and Jeffrey Carr, President, Economic & Policy Resources (EPR), announced the Q1 of 2019 outlook results of their joint initiative, the VBR/EPR Business Conditions Survey and Index. The latest survey, which was conducted during January of 2019, achieved a response rate of 62 percent overall.
More than 60 percent of respondents shared negative outlooks specifically with ease of hiring for available positions (64%); a decrease from the previous survey (82%). A supermajority of respondents expressed a neutral or negative outlook about the State’s overall business climate (85%); an increase from the previous survey (72%). However, expected demand for the next three months was also increased slightly from the previous quarter (41%). When asked, “Are you more or less optimistic about the general business climate in your sector compared to three months ago?”, the responses were largely neutral or negative. The Accommodations and Food Services sector expressed the most optimism (43%), while the Education sector had the most pessimistic outlook (80%).
The survey is attached as a pdf below. The next survey will be conducted in April 2019.