January Jobs Report: 379K New Jobs, Unemployment Rate Down To 6.2%

This morning's employment report for February showed a 379K increase in total nonfarm payrolls, which was above the Investing.com forecast of 182K jobs added.

Here is an excerpt from the Employment Situation Summary released this morning by the Bureau of Labor Statistics:

Total nonfarm payroll employment rose by 379,000 in February, and the unemployment rate was little changed at 6.2 percent, the U.S. Bureau of Labor Statistics reported today. The labor market continued to reflect the impact of the coronavirus (COVID-19) pandemic. In February, most of the job
gains occurred in leisure and hospitality, with smaller gains in temporary help services, health care and social assistance, retail trade, and manufacturing. Employment declined in state and local government education, construction, and mining.

Effect of Severe Winter Storms on Employment Estimates
Severe winter weather occurred in much of the country during the February reference periods for the establishment and household surveys. For information on how weather can affect data on employment and hours, see Question 8 in the Frequently Asked Questions section of this news release.

Here is a snapshot of the monthly percent change in Nonfarm Employment since 2000. We've added a 12-month moving average to highlight the long-term trend.

PAYEMS Monthly Change

The unemployment peak for the last cycle was 10.0% in October 2009. The chart here shows the pattern of unemployment, recessions, and the S&P Composite since 1948. Unemployment is usually a lagging indicator that moves inversely with equity prices (top series in the chart). Note the increasing peaks in unemployment in 1971, 1975, and 1982. The mirror relationship appears to repeat itself with the previous bear markets. The COVID-19 pandemic briefly showed the same type of relationship between equities and unemployment, though the impact was temporary and irrational exuberance took over once again.

Unemployment and the Market

Now let's take a look at the unemployment rate as a recession indicator or more specifically the cyclical troughs in the UR as a recession indicator. The next chart features a 12-month moving average of the UR with the troughs highlighted. As the inset table shows, the correlation between the MA troughs and recession starts is remarkably close.

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