By Andrew Moran
The number of Americans filing applications for state unemployment benefits was flat ahead of tomorrow’s highly anticipated February jobs report.
Initial jobless claims for the week ending Feb. 28 were unchanged at 213,000, according to Department of Labor data released on March 5. Economists had forecast a reading of 215,000.
The four-week average, which strips out week-to-week volatility, fell to below 216,000.
Recurring claims—a measure of the number of individuals currently receiving jobless benefits—increased to a higher-than-expected 1.868 million. Economic observers use this as a proxy to gauge the challenges workers may face in finding new employment in today’s labor market.
These new numbers come one day before February’s nonfarm payrolls report.
A flurry of recent indicators suggests employment conditions have remained stable and are not falling off a cliff.
Following a gain of 130,000 new jobs in January—a surprise to the upside—estimates suggest payroll growth may have slowed last month.
Market watchers expect the March 5 report to show nearly 60,000 new jobs and an unemployment rate holding steady at 4.3 percent.
But Torsten Slok, chief economist at Apollo Wealth Management, says tomorrow’s numbers may beat market forecasts based on new data from the Chicago Federal Reserve.
“The Chicago Business Barometer for February showed strong improvements across production, employment, new orders, and deliveries,” Slok said in a note emailed to The Epoch Times.
“Nonfarm payrolls in February could be significantly stronger than the 58,000 currently expected by consensus.”
February’s reading could be better than anticipated due to sustained employment growth in health care and private education, as well as a rebound in government hiring, said Joseph Brusuelas, chief economist at RSM.
He expects a net increase of 70,000 positions and a jobless rate of 4.3 percent.
“In other words, the labor market is at full employment despite slowing monthly gains,” Brusuelas said in a March 3 note.
Prior to the February jobs report, various labor market updates were released.
Private payroll processor ADP reported that businesses added 63,000 new jobs, up from the previous month’s downwardly revised 11,000.
Planned job cuts declined 72 percent from a year ago to 48,307, according to global outplacement firm Challenger, Gray and Christmas.
Fourth quarter labor productivity rose by 2.8 percent, while unit labor costs also advanced 2.8 percent, the Bureau of Labor Statistics reported on March 5.
Revisions Ahead
The Bureau of Labor Statistics will also introduce annual population control adjustments to the Current Population Survey—the household survey portion that crafts the unemployment rate—in tomorrow’s jobs report.
This update incorporates revised population data and re-weights survey responses to reflect demographic characteristics such as age, national origin, race, and sex.
One area that it will likely feature is immigration, said Bill Adams, Comerica Bank’s chief economist.
“These ‘population control’ revisions include data on immigration and so will almost certainly revise down the levels of the labor force, employment, and unemployment,” Adams said in a note to The Epoch Times.
“Post-revision, the household survey may well show that employment fell over the last 12 months.”
Health Care Concentration
The administration has touted that all employment gains over the past year were in the private sector. But the data also show that health care and social assistance—which rely partly on government funding—have become the backbone of the U.S. labor market.
These sectors accounted for 95 percent of January’s job growth and represent 15 percent of the national workforce after adding almost 700,000 positions last year.
In February, education and health services contributed 58,000 to private payrolls, according to ADP’s latest National Employment Report.
However, with an aging population and rising incomes, employment growth in these sectors has been trending higher over the past 25 years, according to labor economists at Indeed Hiring Lab.
“As the largest waves of Baby Boomers have begun to reach retirement age, these dynamics have intensified,” they said in a March 3 research note.
“For example, demand for home healthcare workers has grown considerably and is expected to continue to increase steadily in the coming years.”
Monetary policymakers have also noticed this trend.
“Job gains have been concentrated in just a few nonbusiness service industries that are less cyclically sensitive, with health care accounting for all private job gains last quarter,” Fed Vice Chair for Supervision Michelle Bowman noted in a Jan. 30 speech.
Bowman warned that a “less dynamic” labor market could pose risks, mainly higher layoffs if companies “reassess their staffing needs in response to weaker activity.”
Fork in the Road
Inflation or the labor market. That is the question for Federal Reserve officials.
Minutes from the January Federal Open Market Committee policy meeting highlighted this divergence, with officials pointing to risks to either side of the central bank’s dual mandate.
Several individuals supported lowering interest rates if inflation continues to inch closer to the institution’s 2 percent target. Others advocated for keeping rates on hold “for some time” amid elevated inflation.
“The vast majority of participants judged that labor market conditions had been showing some signs of stabilization and that downside risks to the labor market had diminished,” the summary from the Jan. 27–28 meeting stated.
Still, whether the February jobs report surprises to the upside or downside, investors overwhelmingly expect no action later this month.
The odds of officials keeping rates unchanged this month stand at 97.3 percent, according to the CME FedWatch Tool. Futures market data indicate that officials may not lower rates until July or September, when a new regime is implemented.
Fed Chair Jerome Powell’s term expires in May. On March 4, President Donald Trump officially nominated former Fed Gov. Kevin Warsh to be the new head of the Federal Reserve System.
