2016 has got off to a very nervous start with concerns over the slowing of the Chinese economy and (perversely) a weak oil price dragging down Chinese and global stock markets. There was speculation that the (very modest) increase in US interest rates introduced in December 2015 could stall the US economy somewhat; even the Federal Reserve has had to consider mothballing plans for more rises across 2016 and there was even talk of a reversal of policy. Therefore, the February job creation figure is being scrutinised particularly closely, for the usual “green shoots” of recovery or portents of a fresh economic Armageddon.
Data released by the US Department of Labor show that 242000 new jobs were created in the US economy last month. This is a robust figure which ought to reassure the nervous that the US economy is continuing to strengthen. Any figure above the 200k mark is usually regarded as solid, so given the global market nervousness, this is a good number. In addition, data for December and January was revised upwards by 30K jobs.
Unemployment remained unchanged at an eight-year low of 4.9%. This seems counter-intuitive, but the explanation is that the US workforce continues to grow and more people are registering as unemployed and actively seeking work (so count in the unemployment statistics) now that the prospects of finding work are better.
Those in work saw wages rise by 2.2% (year-on-year) in February which was a slower rate of growth than the 2.5% seen in January, but it remains well above inflation at 1.4%, meaning that disposable incomes are rising which will fuel (marginally!) consumer demand in the US. The initial reading on US Q4 growth was revised upwards to 1% from an original reading of 0.7%. Whilst this data and the current global economic situation probably don’t support an imminent rate rise, they do strengthen the case for more normalisation over the course of the year.