US Videos

Jobs Weather the Storm

Jason Stipp

Jason Stipp: I'm Jason Stipp with Morningstar. The government released its employment report this morning, and despite worries about weather wreaking havoc with numbers, the employment situation was holding pretty steady. About 36,000 jobs were lost, and the unemployment rate held steady at 9.7%.

Here with me to dig into the numbers is Morningstar's Bob Johnson, he's associate director of economic analysis. And Vishnu Lekraj, he's an employment sector analyst for Thanks for joining me, guys.

Vishnu Lekraj: Thank you.

Bob Johnson: Great to be here.

Stipp: First question for you, Vishnu, maybe you should have a future as a meteorologist. You were saying yesterday that probably the weather's not going to have a huge effect on this. It turned out not to have a big effect, so what did we learn today on that?

Lekraj: We learned that when they calculate the numbers, it's a little different than what everyone thinks. Everyone looks back at past history and tries to extrapolate that out. I think one of the big lessons we've learned is that the administration, the press, a little bit, likes to build a big story throughout the week, so they get hits on the websites, views on the television, and things like that.

But when you break the numbers down, when you thought logically about what will happen and how they calculate the numbers, I came to the conclusion that there wasn't going to be a huge effect and there was not.

Read Full Transcript

Stipp: It seemed like some people who maybe weren't working maybe picked up some work shoveling some snow, during that report they mentioned here, certainly a good thing to see.

Bob, it does look like we're holding steady right now. It feels like maybe we're reaching a trough or a bottom. How long until we maybe start to see some improvements? What are you seeing in the report that indicates that we'll actually see some growth eventually?

Johnson: Six of the 12 categories that I track in the report did show growth in the month of February. Some of it wasn't as good as it was in January, and that was with the snowstorms, though, in February. So, I was pleased to see six out of 12 categories up. I think that's one of the key things to look at.

I'm excited about the 9.7% unemployment rate. That's certainly a number that factors into a lot of budget calculations. Most people had been thinking that number would be more like 10%. The lower that number stays, the more it helps the deficit. So, I'm pleased to see that number come in low as well.

Stipp: It's really construction then that's hold us back, would you say? If we're seeing growth in other areas, that's really still the drag on the overall picture.

Johnson: Correct. We lost 60,000 jobs in construction last month, again, and some of that was probably weather-related. But nevertheless, that is the one sector that's still having a really tough time of it. Manufacturing was still in the black this time around.

Stipp: Vishnu, what did you see in the report that indicates where we might be?

Lekraj: I think when you look at the report, it's pretty much mixed and pretty much flat. It's stabilized--again, slow growth here over the first half, more robust growth over the second half of this year.

When you look up and down every category, everything's slowed a little this month, which is not a big deal. I think everyone needs to take a breath and be patient with the numbers.

Temporary labor, again, was very good, led job growth within each sector. Health care is very strong. But when I look at the numbers, I looked at something else this month that really got me excited. It was the average number of weeks unemployed, and that improved. That actually ticked down, which is also a good sign.

Bob was right with the unemployment rate holding steady. But when you look at the U6, or the shadow rate, that went up. And what that means is that some folks who want to work full-time can only get part-time work and that's less money in their pocket.

Stipp: Sure. Bob, again a little bit on the manufacturing front of that number that potentially had some help with some of the inventory restocking, that one was sort of flat the last month after a nice month in January. What do you see in the manufacturing front? Do you think it's a trend that's sustainable there? Or are we going to see some weakness there, now that we've rebuilt some of that inventory?

Johnson: I think we've got tremendous demand in front of us in manufacturing. Manufacturing has helped lead us out of this recession, and I think it's going to continue to do well. I think this month manufacturing did show growth, not as good as it did in January, but all the manufacturing sectors did show growth. That's the good news.

I think that the purchasing managers' surveys, which I track so closely, also had some good numbers over the past couple of weeks. I think we'll continue to see an improving manufacturing environment. Even as we talk to our teams, the people who cover Caterpillar and the like are seeing better and better results out of those companies.

I think we're just beginning to see some of that rebuilding process going on, so I think manufacturing is going to do really well. The numbers this month were obviously a little bit affected by some of the Toyota issues with some plant shutdowns there.

Stipp: OK. Vishnu, another thing that we try to keep an eye on is the average workweek and the wages. What did it look like on that front in the report?

Lekraj: The average number of hours worked throughout the week went down, or ticked down, a little bit, which is not really a good thing, but the weather maybe played a little part in that. Still, that went down slightly. Wages went up. Both of them, you know they're not diverging views. They don't go hand in hand; they may cancel each other out, which is a positive thing.

Stipp: Certainly, if people have a little bit more money in their pocket, if they begin to spend, that's a great thing for the economy even if we haven't quite hired more people on, yet. More money in the system's more money in the system.

Johnson: Actually we saw this week that they are spending some of that money, which is really kind of the most exciting. Everybody was focusing on the jobs number; it was the least important number this week.

I was very excited about the consumption numbers we saw on Monday. Up 0.5% in one month, that kind of annualizes out to 6%. It's one of the best spending months for the consumer that we've seen.

And then we saw it carry through--that was for the month of January--and then we saw some early reads on February, with the retail sales reports from individual stores yesterday. A composite report of those showed retail sales up more than 4% year over year in February, which is kind of a crummy month.

Stipp: That's certainly some good signs. But again, I think the word is patience, as you mentioned before for some of these things to flow through and create jobs.

Lekraj: The consumer's improving and that's a good thing. But when we look at the government sector, that's struggling a little bit. Especially the states and local governments, they've lost jobs year over year. Sequentially, they've ticked down.

There was a jobs bill passed yesterday through the House. It still has to go through reconciliation, in terms of what the Senate passed, but within this bill they're going to have a provision that should help states and local governments.

Stipp: Hopefully, we'll see some improvement there.

Lekraj: Hopefully.

Stipp: OK. Thanks again for your insights, guys. It was good speaking with you.

Lekraj: Thank you.

Johnson: Glad to be here.

Stipp: For Morningstar, I'm Jason Stipp. Thanks for watching.