February Private Payolls: The Best Month For Growth Since November

Private-sector payrolls grew by 246,000 in February on a seasonally adjusted basis—the most since November and at a substantially faster pace compared with January’s relatively tepid rise of 140,000, the Labor Department reports. Meanwhile, the year-over-year percentage change in private payrolls continued to advance at just under 1.9% through last month, or roughly in the range we’ve seen in recent history. In addition, the unemployment rate ticked down to 7.7%, a post-recession low. Is this a sign that growth is set to ramp up in the labor market? Maybe, but that’s a speculative interpretation of today’s data. What we can say with a high degree of confidence is that the moderate growth train of late rolls on.

Today’s decent payrolls report isn’t all that surprising, given the economic reports in recent days, and as yesterday’s preview suggested. Wednesday’s release of the February ADP Employment Report was certainly encouraging, as was yesterday’s weekly update on initial jobless claims. Overall, the incoming data for February continues to trend positive, as I noted in Monday’s update of The Capital Spectator Economic Trend & Momentum indices. After several days of upbeat data points, the econometric case for arguing that recession risk remains low resonates a bit deeper as the business week comes to a close.

Today’s employment news is particularly encouraging in that it shows that the trend, defined by the year-over-year change, continues to plod along at a modest pace. The ~1.9% annual growth rate for private-sector payrolls by itself is no guarantee that the business cycle will avoid trouble. On the other hand, when today’s jobs report is considered in context with the generally upbeat signals from a broad mix of indicators, it’s clear that there’s minimal support in the data for expecting a dark turn in the macro outlook for the near term.
That doesn’t mean that business-cycle risk is nil. Any number of problems could arise in the weeks and months ahead that render the modest growth trend of late null and void. The fiscal follies in Washington come to mind as a potential threat. And there’s always the Middle East to consider as a macro trouble spot for the world economy. Europe’s ongoing struggles beyond Germany are problems too.
But if we’re assessing macro risk for the US today, based on the data points in hand, the broad profile remains encouraging. That’s been true all along, even though some pundits try to convince us otherwise. But a sober and fair reading of the numbers—across a broad cross section of the economy—speak loud and clear: slow-to-moderate growth is still the path of least resistance.