Fewer Drywall Nailers, More Baristas

The Bureau of Labor Statistics released the February jobs report earlier today. A total of 97,000 new jobs were created in February and the unemployment rate fell to 4.5 percent.

Upward revisions were reported (surprise!) for the two prior months where the initially reported gain of 111,000 in January increased to 146,000 and the December increase of 206,000 improved to 226,000.

For the month, categories showing improvement were Government (+39K), Leisure and Hospitality (+31K), Education and Health Services (+31K), and Professional and Business Services (+29K). Construction declined sharply (-61K) along with Manufacturing (-14K).

The headline numbers have pleased the "Goldilocks" crowd, someone on CNBC commenting, "Every month, it seems like the employment number that we get refutes all the other numbers that have us thinking that things are slowing down. It's been happening month after month. Oh, it's a lagging indicator and it will show up eventually - it still isn't."

As shown in the charts below, even the now-dubious employment data from the BLS shows an underlying trend that is changing dramatically, just in the last few months. While the weather was blamed for the most recent job losses in construction, the sharpest monthly decline since 1991, there has been a steady erosion in this category for many months now as other categories such as education and health, leisure and hospitality, and professional services have remained firm.


Looking at the detail behind the construction employment data, it appears that the nonresidential construction hiring spree may now be over. Again, weather was surely a factor, but February's declines erased almost all of January's gains for nonresidenial building and specialty trade, following two very weak months to close out 2006.

Residential construction employment (both residential building and specialty trade) has been declining steadily since early 2006 and took another turn for the worse last month.


One of the more interesting categories in the labor report is leisure and hospitality. It was number two in job creation last month, right behind new positions created by federal, state, and local governments.

As shown below, while hoteliers and Mickey Mouse operations may have taken on some new staff recently, the bulk of the job creation in this category continues to come from dining and drinking establishments.


Hey, all the health care workers, educators, and government workers have to eat somewhere!