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Economic Watch: Employment Improves Despite Trucking Losses

March 4, 2016

By Evan Lockridge

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Gains in total U.S. employment remain strong, with a new report showing non-farm payrolls increased in February from the month before. Meanwhile, a renowned economist said this week the U.S. economic picture is one of the brightest on the world’s economic stage.

According to the U.S. Labor Department, there were 242,000 jobs added in February, far better than the revised 172,000 additions in January. The department also revised upward jobs gains in January and December by a total of 30,000 more than previously reported.

The unemployment rate remained at 4.9% for February, as the participation rate increased a modest 0.2% to the highest level in a year, with more discouraged workers looking for jobs.

February job growth occurred in health care and social assistance, retail trade, food services and drinking places, and private educational services, according to the department. Mining employment continued to decline.

Employment in other major industries, including manufacturing, wholesale trade, transportation and warehousing, financial activities, professional and business services, and government, showed little change.

For-hire trucking lost 600 jobs in February, and the larger transportation and warehousing sector shed 5,300 jobs, due in large part to a 4000-job drop in courier and messenger jobs. Trucking jobs in January were revised upward to 2,500 jobs gain, compared to 1,500 that were added in the first report a month ago.

The report also showed overall wages declined 0.1% in February but are up 2.2% from a year ago.

Lindsey Piegza, chief economist with Stifel Fixed Income, described the report as very strong and significantly more robust than expected.

“This morning’s report is certainly strong enough to support the Federal Reserve thesis that the labor market is gaining momentum and continuing to move towards the status of full-employment, fueling the argument the U.S. economy is ready and able to withstand a continued rise in [interest] rates," she said. “The disappointing decline in wages, meanwhile, will give some committee members pause; however, the recent uptick in inflation pressures outside of wages may offset concerns over a one-off decline in monthly wage growth."

U.S. Economic Prospects Good Despite Headwinds

The latest report adds to evidence the U.S. economy is doing well in comparison to the global economy, thanks in large part to consumers, said IHS Chief Economist Dr. Nariman Behravesh, speaking this week at the Journal of Commerce’s 16th Annual TPM Conference in Long Beach, California.

“Consumer spending was extremely strong in January, but even over a three month period consumer spending has been strong," he said. "Best guess, consumer spending after adjusting for inflation in the U.S. is 3% – that is really solid growth.

"So the consumer, which represents 70% of the economy, is driving growth. Housing is also driving growth as well, not as strong, but together they are about 80% of the economy. So 80% of the U.S. is doing rather well. In addition, income growth is good, job growth is good, and interest rates are low, which is helping to support these sectors of the economy.”

Despite the overall assessment, Behravesh cited three negatives. One is trade, affected by the increase in the value of the U.S. dollar, making goods made here more expensive overseas and imports to the U.S. less expensive.

A second negaitve is "this very dramatic plunge in capital spending in the energy sector due to the huge drop in oil prices; capital spending is half of what it was two years ago."

And finally, Berhavesh said, "we seem to be in the middle of an inventory cycle."

Inventories the past several months have been higher than normal, leading to less shipments. Numbers released earlier this week show it is improving somewhat.

He expects trade will likely not recover this year or even in 2017 or 2018, and when it does it will not see the growth rates witnessed in 1990s or the 2000s.

“Volume growth in global trade two decades ago was around 7%, which was twice GDP growth. Recently it’s been around 2%, which is less than GDP growth."

Figures released Friday the federal government show the U.S. trade deficit widened in January to $45.7 billion, the largest since last August.

“Net trade was a modest drag on growth in both third quarter and fourth quarter of 2015, subtracting 0.3 percentage points from gross domestic product in each quarter, as exports declined and imports grew on average over the second half of last year, said Josh Nye, economist at RBC Economics. “That trend is expected to continue this year with subdued global demand and a strong currency weighing on exports while relative strength in the domestic economy and cheaper prices for goods abroad support imports.”

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