A Hefty Upside Surprise For February Payrolls

Private payrolls increased substantially more than expected in February, delivering an encouraging dose of optimism in the wake of wobbly data in recent weeks from other corners of the economy. US companies added 288,000 jobs last month, according to this morning’s report from the Labor Department — far above the consensus forecast for 230,000 via Briefing.com. The news is all the sweeter since it contrasts with the lesser rate of growth that’s implied via this week’s ADP Employment Report for February.

It remains to be seen if the government’s latest estimate for payrolls holds on to its stellar rise in the revisions in the months ahead. Yesterday’s news on jobless claims certainly leaves room to wonder if today’s release is as strong as it appears. But taking the numbers at face value for the moment, there’s a bullish glow emanating from the data du jour. The positive trend is particularly visible in the year-over-year change, which is currently at the highest pace since the late-1990s.


Private payrolls increased nearly 2.8% for the year through last month, the most since August 1998. By the standards of the past 30 years, this is as good as it gets. There’s still plenty to worry about, of course (what else is new?). But today’s payrolls data—the annual trend, in particular—suggests that there’s a robust degree of forward momentum in the core macro trend.

Business cycle risk, as a result, remains quite low. That’s old news, as the economic profiles on these pages have been repeating for some time (see last month’s update, for instance). What’s different in the wake of this morning’s numbers is that there’s a bit more confidence in this assessment relative to the last several weeks. In turn, the notion of an early rate hike by the Federal Reserve—perhaps as early as June—is back on the table as a plausible scenario.

For what it’s worth, the probability that the Fed funds target rate will be north of zero in June, for instance, is currently around 70%, according to futures data via CME. Move ahead one month to July 2015 and this market-based probability rises to 84%.