Meet the Author

Yoonsoo Lee |

Research Economist

Yoonsoo Lee

Yoonsoo Lee was formerly a research economist in the Research Department. His areas of research include macroeconomics, labor economics, and regional economics.

Meet the Author

Beth Mowry |

Research Assistant

Beth Mowry

Beth Mowry was formerly a research assistant in the Research Department of the Federal Reserve Bank of Cleveland. Her work focuses on labor markets and business cycles.

03.10.08

Economic Trends

The Employment Situation

Yoonsoo Lee and Beth Mowry

Nonfarm payroll employment declined by 63,000 in February, coming in below expectations of a 25,000 gain. January’s loss (initially 17,000) was revised downward to a loss of 22,000. Payroll declines were last seen in August 2003, and this report brings the second consecutive monthly decline. December’s gains were also cut in half to just 41,000 jobs. Somewhat surprisingly, the unemployment rate dipped slightly, from 4.9 percent to 4.8 percent, but this was because of a decline of 450,000 jobs in the labor force, not a rise in employment. Subtracting out the government’s contribution of 38,000 jobs, private sector payrolls fell by a significant 101,000.

Goods-producing industries lost 89,000 workers in February. The manufacturing sector led the way with a 52,000 loss, its largest since July 2003 and the twentieth straight month of decline. Within manufacturing, durable goods lost 40,000 jobs and nondurable goods lost 12,000. In production manufacturing, 59,000 jobs were cut, the largest loss this category has experienced since July 2003.  Construction continued its shedding trend for the eighth consecutive month, losing 39,000 jobs. Within construction, residential construction faced the largest losses (14,000), but nonresidential construction also lost 3,700 jobs.

Service sector employment rose by just 26,000 workers last month, its weakest gain since October 2005. Even with the government’s 38,000 payroll boost to the total services figure, private services lost 12,000. Within services, leisure and hospitality continued a positive streak, adding 21,000 to their payrolls, and health services added 36,800. Food services continued to go strong, adding 19,900 employees. Professional business services, which lost 9,000 jobs in January, experienced its second straight month of decline with a loss of 20,000 jobs. Temporary help fell the most within professional business services, with a loss of 27,600. Financial service activities also fell by 12,000, in line with a year of fairly consistent and comparable decline.

Labor Market Conditions

        <
Average monthly change
(thousands of employees, NAICS)
       
2004
2005
2006
2007
YTD
February
2008

Payroll employment

173
211
175
91
−63
 

Goods-producing

26
32
3
−38
−89
   

Construction

25
35
13
−19
−39
   

Heavy and civil engineering

1
4
3
−1
−5
   

Residentiala

10
11
−2
−10
−26
   

Nonresidential b

2
4
7
1
−9
   

Manufacturing

−1
−7
−14
−22
−52
   

Durable goods

8
2
−4
−16
−40
   

Nondurable goods

−9
−8
−10
−6
−12
 

Service-providing

148
179
172
130
26
   

Retail trade

16
19
5
6
−34
   

Financial activitiesc

8
14
9
−9
−12
   

PBSd

39
56
46
26
−20
   

Temporary help svcs.

11
17
1
−7
−28
   

Education and health svcs.

33
36
39
44
30
 

Leisure and hospitality

26
23
32
29
21
 

Government

14
14
16
21
38
 

Local educational svcs.

9
6
6
5
11
       
Average for period (percent)

Civilian unemployment rate

5.5
5.1
4.6
4.6
4.8

a. Includes construction of residential buildings and residential specialty trade contractors.
b. Includes construction of nonresidential buildings and nonresidential specialty trade contractors.
c. Financial activities include the finance, insurance, and real estate sector and the rental and leasing sector.
d. PBS is professional business services (professional, scientific, and technical services, management of companies and enterprises, administrative and support, and waste management and remediation services.
Source: Bureau of Labor Statistics.

The three-month moving average of private sector employment growth dipped into negative territory for the first time since August 2003. This measure can provide a cleaner read of labor market conditions because it removes some of the monthly volatility and the consistent boost provided by the government.

Labor Market Conditions and Revisions

       
Average monthly change
(thousands of employees, NAICS)
       
December
current
Revision to
December
January
current
Revision to
January
February
2008

Payroll employment

41
−41
−22
−5
−63
 

Goods-producing

−73
−12
−54
−3
−89
   

Construction

−55
−10
−25
2
−39
   

Heavy and civil engineering

−5.2
0
−5.3
2
−5
   

Residentiala

−36.9
−5
−29.7
−2
−26
   

Nonresidentialb

−13.5
−5
10.1
1
−9
   

Manufacturing

−22
−2
−31
−3
−52
   

Durable goods

−24
−5
−19
−7
−40
   

Nondurable goods

2
3
−12
4
−12
 

Service-providing

114
−29
32
−2
26
   

Retail trade

−25
−13
0
−11
−34
   

Financial activitiesc

−8
−7
−8
−6
−12
   

PBSd

52
−18
−9
2
−20
   

Temporary help svcs.

−5
2
−11
−2
−28
   

Education and health svcs.

46
−10
49
2
30
 

Leisure and hospitality

7
−15
11
−8
21
 

Government

55
27
4
22
38
 

Local educational svcs.

17
3
0
5
11

a. Includes construction of residential buildings and residential specialty trade contractors.
b. Includes construction of nonresidential buildings and nonresidential specialty trade contractors.
c. Financial activities include the finance, insurance, and real estate sector and the rental and leasing sector.
d. PBS is professional business services (professional, scientific, and technical services, management of companies and enterprises, administrative and support, and waste management and remediation services.
Source: Bureau of Labor Statistics.

Overall, this month’s employment report points to further weakening in labor markets. However, it is worth noting that monthly numbers are volatile and subject to revision. The Bureau of Labor Statistics (BLS) revised January’s initial loss of 17,000 jobs to a slightly larger loss of 22,000 in this month’s report. December’s gain of 82,000 was also trimmed back to a gain of 41,000. Payroll gains (or losses in this case) for January and February are subject to revision in the next report.