Payrolls fell by 63,000, the biggest drop since March 2003, after a decline of 22,000 in January that was larger than initially estimated, the Labor Department said today in Washington. The jobless rate declined to 4.8 percent, reflecting a shrinking labor force as some people gave up looking for work.Heightened Liquidity Pressures
Just before the jobs announcement, the Fed said it will expand two short-term auctions this month to $100 billion, from $60 billion, to address "heightened liquidity pressures in term funding markets."
Futures on the Chicago Board of Trade showed traders see a 32 percent chance that policy makers would lower the target rate for overnight lending between banks by 1 percentage point by their next scheduled meeting on March 18. The balance of bets was on a three-quarter-point reduction.
For more on heightened "liquidity pressures" please see Financial System Broken - Markets 'Utterly Unhinged' and Disconnect In Treasuries.
Fed to Increase TAF and Emergency Repos
Inquiring minds will be interested in emergency actions by the Fed hoping to restore liquidity. Please consider Fed To Increase TAF, Announces Up To $100 Billion In Term Repo Operations.
In an effort to inject liquidity into the market, the Federal Reserve announce Friday that it is upping the amount of credit offered through the Term Auction Facility (TAF) as well as kicking off a series of term repurchase transactions. The announcement came on the heels of a February employment report that revealed the biggest monthly job loss, a decline of 63,000, in over 5 years.February Jobs Report
"The Federal Reserve will increase these auction sizes further if conditions warrant," the policymaking arm of the U.S. central bank said in a statement. "To provide increased certainty to market participants, the Federal Reserve will continue to conduct TAF auctions for at least the next six months unless evolving market conditions clearly indicate that such auctions are no longer necessary."
The Fed also announced a series of term repurchase transactions that will reach $100 billion. The agreements will allow "primary dealers may elect to deliver as collateral any of the types of securities--Treasury, agency debt, or agency mortgage-backed securities--that are eligible as collateral in conventional open market operations." The Fed added that they will increase the size of the repurchase operations "if conditions warrant."
"The Federal Reserve is in close consultation with foreign central bank counterparts concerning liquidity conditions in markets," the statement read.
With the above backdrop in mind, let's take a look at the February Jobs Report.
Nonfarm payroll employment edged down in February (-63,000), and the unemployment rate was essentially unchanged at 4.8 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Employment fell in manufacturing, construction, and retail trade. Job growth continued in health care and in food services. Average hourly earnings rose by 5 cents, or 0.3 percent, over the month.
This notion of jobs "edging down" is preposterous. It takes about 150,000 jobs a month just to keep up with the birth rate and immigration. The loss of 63,000 jobs was an unmitigated disaster that cannot be hidden by obvious spin aimed to soften the blow.
Details Worse Than Headline Numbers
- Construction Jobs Fell 39,000
- Manufacturing Jobs Fell 52,000
- Goods Producing Jobs Fell 89,000
- Private Sector Jobs Fell 101,000
- Government Jobs Rose 38,000
The amazing thing is that this was all considered "unexpected". It was not unexpected in this corner. I talked about Commercial Slowdown A Disaster For Jobs just two days ago.
Household Survey Data
Magically the unemployment rate dropped in spite of the headline numbers and in spite of the fact that more people want a job than last month.
How did this magic happen?
From the BLS: "Both the civilian labor force, at 153.4 million, and the labor force participation rate, at 65.9 percent, declined in February."
Here is the same sentence in plain English. "The unemployment rate dropped because we stopped counting everyone who is unemployed."
Expect to see more of this kind of nonsense from the BLS and you will not be disappointed. Here is the picture in graphical form.
The "Unlabor" Force
click on chart for sharper image
The above chart shows the "unlabor" force to have risen by 644,000 "unworkers".
Birth Death Numbers Back In Outer Space
Last month there was a massive revision to the Birth/Death Model. Please see Jobs Contract as 2007 Job Growth Revised Away for more details.
This month, the BLS moonbats are back at it as the following chart shows:
click on chart for sharper image
Once again their birth/death model is somehow showing net jobs created by new businesses vs. businesses going out of business. This is preposterous especially in the financial and mortgage services sectors where countless thousands of small 1-5 person mortgage brokers and real estate brokers have ceased doing business.
This economy is clearly in contraction yet the BLS model has not figured it out yet.
One should not subtract those 135,000 jobs from the reported decline of 63,000 jobs because one set of numbers is seasonally adjusted and the other not. However, one can say that no matter how you look at it, this was an extremely weak jobs report, and that is even weaker when one goes digging through the details. It was indeed an unmitigated disaster.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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