Experts Talk February Jobs Report

Bloomberg BusinessWeek compiles comments from Wall Street economists and strategists on the key economic and market topics of Mar. 5.

David Wyss, Beth Ann Bovino, Standard & Poor's

U.S. payroll employment fell another 36,000 in February, while the unemployment rate held at 9.7%. The payroll drop was in line with the consensus estimate of 50,000. The consensus had expected an uptick in the unemployment rate to 9.8%. The job loss was more than accounted for by the 64,000 drop in construction employment, which is probably weather-related. Hard to work on construction in three feet of snow. Manufacturing employment edged up 1,000, its second consecutive increase. Government unexpectedly fell 18,000, mainly on a 24,100 cut in local education. We had expected to see a boost to federal employment because of Census hiring, but that is probably delayed into March because of Washington weather. The household survey shows a big jump of 308,000 in employment.

The discrepancy with payrolls over the last two months is characteristic of early recoveries, as firms bring on contract and temporary hires before they start hiring permanent employees. Temp services rose 47,500, another early indicator. [Average hours worked] dropped 0.1, probably more weather-related problems. Hourly earnings rose 3 cents to $22.46 (all workers).

Overall, the report was close to expectations and should be of little impact to markets.

Dawn Desjardins, RBC Capital Markets

The decline in payrolls is a high-profile indication of the effect that the snowstorms had on the U.S. economy in February and does not signal a loss of momentum in the recovery but rather sets up for the March data to be unusually strong. Averaging the change in payrolls in February and March may provide a better indication of the trend in the measure over this period. The household survey provides a "cleaner" look at what is happening in the economy.

The fact that the unemployment rate held steady and remained below October's high of 10.1% points to a gradual improvement in labor market conditions. Still, the unemployment rate is at an elevated level, implying that considerable unused capacity remains and the persistence of this slack will keep inflation pressures muted.

Neil Dutta, Michael S. Hanson, Bank of America Merrill Lynch

With employers having cut their staffing levels to the bone, there is essentially no more room left for them to cut. They have squeezed all the output they can out of their current employees, as evidenced by the latest productivity data. This means that to keep up with the improving demand backdrop in the economy, they will have no choice but to hire workers. In other words, net job creation is imminent.

This was the second consecutive increase in employment in the household survey, which has been argued to more accurately signal turning points in the labor market. Note that people are counted as employed in the household survey even if they miss work for weather-related events—and even if they are not paid for that time off. So, that the unemployment rate managed to stay flat was not a statistical aberration, it was for real.

Alec Phillips, Goldman Sachs (GS)

Expanded unemployment benefits expired on Monday, after the Senate failed to enact legislation to renew them and several other programs. These have since been reinstated, but the brief expiration may still result in a temporary cessation of benefits to roughly 250,000 unemployed this week. We do not expect this to have a significant effect on incomes, as the effect will be temporary. It should also not have an important effect on weekly jobless claims reports, as the affected benefits are not included in the regular continued claims data. Aside from the short-term disruption, an increasing number of individuals will face an end to benefits over the next several months even with continued renewal of the current emergency benefits by Congress. More than 400,000 jobless workers could run down their federal benefits each month over the next several months, even assuming that Congress continues to renew the expanded benefit period now in place.

It is possible that Congress could lengthen the maximum benefit period yet again, but the political climate is not as conducive to additional expansions as it had been last year. The result is likely to be a greater share of unemployed workers not receiving unemployment compensation.

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