The February 2008 U.S. employment numbers were recently released. How do the latest figures match up against two key benchmark measures?

Results: The year-over-year percentage change in U.S. total employment was +0.6% in February, 2008. This was the lowest figure dating back to early 2004. The month-to-month change in the actual number of jobs was -63,000. February was the second period in a row of decline after 52 straight months of increase.

Most industrial sub-sectors are showing employment weakness. Construction (-2.9%) and manufacturing (-2.1%) are both recording job losses on a year-over-year basis. The number of retail jobs (0.0%) is almost exactly even with the same time a year ago. The same is the case for transportation and warehousing employment (+0.2%). Employment in financial services has turned decidedly negative (-1.4%), as a result of the credit crunch. Only three sectors continue to show strength: education and health (+3.0%); leisure and hospitality (+2.5%); and government (+1.1%).

These latest job results will provide more justification for the Federal Reserve to get on with lowering interest rates. On a positive note, average hourly earnings in the U.S. were +3.7% in the latest month, which was actually less than the most recent increase in “headline” (i.e., all-items) price inflation (+4.3%).

Two Key Benchmark Measures: There are two benchmark figures to target with respect to U.S. employment: (1) +1.2% year-over-year job growth; and (2) +140,000 as the long-term average increase in the month-to-month number of jobs. As long as these targets are being approached or exceeded, it is hard to say too much negative about the U.S. labor market. If the latest figures fall short, the economy may still be okay as long as some other key indicators are positive. However, if the latest figures fall short and there are other indications of slowdown, then warning signs start to flash about overall weakness in the economy. Job growth leads to income growth, which drives consumer spending (70% of U.S. Gross Domestic Product).

Alex Carrick

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