Jumpin’ ju-ju bones. The Bureau of Labor Statistics highlights an excellent jobs report for February with 273,000 new jobs added; and an upward revision of 85,000 job gains in December and January. Total new jobs with revisions 358,000; that’s exceptional.
Main Street USA is very strong, exceptionally strong; and the fundamentals of the U.S. economy show balance and overall strength. Keep in mind, while all of this growth is happening the full impacts of the renegotiated trade deals have yet to kick in.
Highlighting the strength in the overall economy the construction sector added 42,000 jobs in February, following a similar gain in January (+49,000). In 2019, construction job gains averaged 13,000 per month. In February, employment gains occurred in specialty trade contractors (+26,000) and residential building (+10,000). This specific metric is important because it highlights economic expansion from U.S. workers and households having financial strength for home purchasing.
(BLS DATA) Total nonfarm payroll employment rose by 273,000 in February, and the unemployment rate remains at 3.5 percent. Over the past 12 months, average hourly earnings have increased by 3.0 percent.
The change in total nonfarm payroll employment for December was revised up by 37,000 from +147,000 to +184,000, and the change for January was revised up by 48,000 from +225,000 to +273,000. With these revisions, employment gains in December and January combined were 85,000 higher than previously reported. (link)
Additionally, from economic reports released yesterday, productivity increased 1.2 percent in the fourth quarter; and production output increased 2.4 percent while hours worked increased 1.2 percent. This means the demand for goods and services continues to grow within the overall economy.
The demand is strong and production of goods and services is increasing in response to consumer demand. Increases in productivity are another key metric.
Economic analysis can get weedy…. so a simple way to look at productivity is to think about baking bread in your kitchen.
If you were going to bake 4 loaves of bread it might take you 2 hrs start to finish. However, if you were going to bake 8 loaves of bread it would not take you twice as long because most of the tasks can be accomplished with simple increases in batch size, and only minor increases in labor time. Your productivity measured in the last four loaves is higher.
Economic Productivity is measured much the same way, within what’s called a production probability equation. Additionally, if two hours of your time are worth $40, each of four loaves of bread costs $10; but if you make 8 loaves in the same amount of time the labor cost is only $5/per loaf.
Increases in productivity means total business output increased significantly as more product was demanded from within the business operation. Throughout the economy people just wanted more stuff.
Improved gains in efficiency/productivity (more bread needed) supports faster economic growth without generating higher inflation; no need to raise prices because your cost to make each loaf of bread decreases the more you make. Higher sales and lower per unit cost means more profit for the bread-maker. No need to raise prices.
Increases in productivity generally means the economy is generating more stuff. The more stuff generated the higher the value of all economic activity; this increases GDP growth.
When we see higher productivity in direct alignment with GDP increases, the increased production indicates sustainable GDP growth. This means Main Street USA is stable.
Wage growth leads to more consumer purchasing; that fuels increases in productivity and a demand for more labor, thus fueling the Main Street economic engine. Keep in mind, while all of this internal economic growth is happening the full impacts of the renegotiated trade deals have yet to kick in…. There will be more domestic manufacturing, more domestic investment and a demand for more workers; ie. more jobs and higher wages.