Ever since the “Great Recession,” as the economy very slowly recovered, there have always been some hidden weaknesses in even the best of reports. If the economy added a lot of jobs as measured by the establishment survey, the employment level, as measured by the household survey, didn’t measure up. If the unemployment rate dropped, it was often because some of the labor force had mysteriously vanished. Or the average work week declined. Or there were downward revisions to the previous two months.
But not this time. The economy added 313,000 jobs – much more than expected. And the growth in employment blew past that figure, rising by 785,000. The only reason that the official unemployment rate didn’t drop is because the labor force grew by 806,000 – in a month when the total population grew by only 160,000. So where did all of these workers come from if the economy was at “full employment” as so many “economists” would have you believe? They came from the labor force backlog that was created by the “mysteriously vanishing labor force” trick employed by the Obama administration. As a result, the labor force participation rate rose by 0.3%.
And there was more good news. Manufacturing employment rose by 31,000 and is now up by 125,000 in just the last four months. The average work week increased by 0.1 hours and wages rose by 0.1% – a modest increase, but one that keeps wage growth year-to-year at 2.6%, which is greater than inflation. And the numbers of jobs added were revised upward for both December and January, adding another 54,000 jobs.
I’ll admit that the growth in manufacturing employment puzzles me. Exports haven’t grown at all, while imports have been soaring. That leaves domestic consumption as the only possible explanation, but GDP (gross domestic product) grew at only a 2.5% rate in the fourth quarter. Perhaps growth is accelerating in the 1st quarter? Perhaps manufacturers are beginning to sense that, while the tariffs we’ve seen so far under Trump have been modest, Trump means business with his “America First” approach and they are changing their strategy away from off-shoring and back toward more domestic production. If that’s what’s happening, and if Trump continues to levy more tariffs to help domestic manufacturers, then the job gains we saw in February may be only a small taste of what’s to come.