The U.S. Department of Labor released the Employment Situation Report last Friday. Nonfarm payroll employment was down 63,000 in February compared to January. This was the second consecutive decline (January was down 22,000 from December). Declines in Payrolls normally only happen during recessions. Since 1948, the U.S. has averaged job growth of 139,000 a month. Declines that have happened during non-recession periods have usually been sandwiched between strong job growth months and therefore were anomalies. For example, Payrolls declined in August 1997 by 18,000, but July 1997 was +283,000 and September 1997 was +508,000.
Before this year, the last previous consecutive monthly declines in Payrolls that wasn’t within one month of a recession was all the way back in 1952. Payrolls often continue falling for 3 or 4 months after the official recession has ended (the NBER often declares the end of recession a year or two afterwards). The 2001 recession was unique where the NBER declared that the recession ended in October 2001, but payrolls continued to decline through the middle of 2003. March 2003 was the last major decline in payrolls. The S&P 500 bottomed in March 2003.
Interestingly, the unemployment rate dropped in February to 4.8% from 4.9% in January. This was largely due to a drop in the labor force by 644,000. There are currently 4.77 million Americans who want a job but are not being counted in the labor force (are not actively looking for a job). There are 4.9 million Americans who are working part time, but would like to work full time.
Looking at Initial Weekly Unemployment Claims, we still have not seen a large spike in claims that happens during recessions.
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