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February US Jobs Report

Event- On a seasonally adjusted basis, total nonfarm employment rose by 200,000 in January, according to the US Bureau of Labor Statistics (BLS) in its monthly jobs report. Temporary help services employment increased by 0.06% in January, adding 1,800 jobs. The national unemployment rate remained at 4.1%. This month, BLS performed its annual revision where it revises monthly employment data going back over several years. One consequence of this is that the temporary help penetration rate (the share of total nonfarm employment made up by the temporary staffing industry) now stands at 2.03%, below its (post-annual revision) record of 2.05% set December 2015. (In last month’s employment report, before the annual revision, the rate was at a record 2.10%.)

Background and Analysis- On a year-over-year (y/y) basis (January 2018 over January 2017), total nonfarm employment was up 1.5%, and monthly job gains have averaged approximately 176,000 over the past 12 months. Temporary help employment was up 3.4% y/y, with monthly job gains averaging approximately 8,100 over the past 12 months.

The economic sectors that most drove total nonfarm employment growth in January (on a seasonally adjusted basis) include construction (+36,000), leisure and hospitality (+35,000), and healthcare and social assistance (+25,800). Overall, 14 of the 15 sectors added jobs in January; the lone decliner, information, lost 6,000 jobs.

BLS Revisions- Today’s jobs report reflects BLS’s annual revision, updating historical data going back several years. As a result of this revision, total nonfarm employment for December 2017 is 230,000 jobs greater than the month’s pre-annual revision number in the report last month. Temporary help employment for December 2017 is 100,000 jobs fewer than it was in last month’s report. The result is a temporary help penetration rate of 2.03% for December 2017, below the record of 2.10% in last month’s report, and below the new (post-annual revision) record of 2.05% for December 2015.

Staffing Industry Analysts’ Perspective- In terms of total nonfarm employment, this was a favorable jobs report, with an increase of 200,000 jobs, higher than the consensus estimate reported by Bloomberg of 180,000. One headline in this month’s report getting a great deal of attention is that average hourly earnings rose 2.9% y/y, the greatest increase since the recession. While this is welcome news after years of stagnant wages, it has been cited as a major factor in today’s decline (thus far) in the stock market, as rising wages increase the likelihood that the Federal Reserve will raise interest rates to manage inflation.

The report was less favorable for temporary staffing. Jobs increased by less than 2,000 in January, after a decline in December (based on post-annual revision numbers). Moreover, after the annual revision completed by BLS, 2017 was still a good year for temporary staffing, but not as strong as it looked before the revision, when the sector showed y/y growth above 4.5% in five months of that year. Looking back on 2017 after the revision, in no month did temporary help grow more than 3.5% y/y, and in 2016 there were several months of y/y declines. (Pre-revision data reflected no such declines in 2016).

Last month, before the revision, we reported that after breaking the 2.0% barrier in February 2000, the temporary agency penetration rate, after more than 17 years, at last reached 2.1%. Post-revision, that never happened. Now, after breaking the 2.0% barrier in the year 2000, the rate is now 2.03%, below its record of 2.05% in December 2015.

Most importantly, after two weak months, as this economic expansion matures, one must wonder how much steam is left in the temporary staffing market in this business cycle.

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Monthly Employment Situation February 2018 - You do not have permission to view this object.

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