All morning there's been news on the "good" parts of the February jobs report released today - but here's the real story.
While unemployment dropped to 5.5% from 5.7%, the labor force participation rate - the percentage of working-age persons (16-64) employed, plus those unemployed but looking for a job - is still low at 62.8%.
The rate, a key measure of a healthy job market, is down from 62.9% in January. Since April 2014, the rate has remained in a tight range of 62.7% to 62.9%, the lowest since 1978. It peaked in the late 1990s and 2000 to just more than 67%.
Also remaining weak are wages.
Average hourly earnings eked up a meager 0.01%, or $0.03, to $24.78 last month. This was a huge disappointment after January's 0.5% jump in wages, to $24.75.
"January's job report showed the largest wage gain for workers in over six years," Steven Pressman, professor of finance and economics at Monmouth University in West Long Brach, N.J., told Money Morning. "It was a rare glimmer of hope for U.S. workers that things might be improving. I was skeptical those good results would continue moving forward. Today we see it was likely a one-shot phenomenon."
Pressman said a good part of January's wage gains came from higher minimum wages. Indeed, 19 states raised minimum wages in January. The month's wage growth jump wasn't a sign the job market tightened to the point where wage growth started heating up. It was simply a sign of higher minimum wages across wide swaths of the country.
Over the last 12 months, average hourly wages have risen just 2.2%. That's handily below the 3% to 5% growth economists deem healthy.
February Jobs Report: Key Numbers
One thing keeping wages low is employers know they don't have to boost wages to attract the eager job pool. There are 6.6 million temporary and part-time workers available to step into fulltime jobs when they pop up.
Wages aside, Pressman found more troubling numbers in Friday's job report...
"Long-term unemployment, those without work for 27 weeks or more, remains well above historical averages," Pressman continued. "At 31.1% of the unemployed, it's nearly double what it has been over several decades. It's also well above the more recent average of a tad over 20%."
Involuntary part-time employment, historically around 3% of the labor force, remains stuck between 4% and 5%, Pressman added. "U-6 unemployment rate, which adds people working part-time who want a full-time job, discouraged workers and those who'd like a job but haven't looked for work in over a year, was 11% in February. That's high relative to the overall unemployment rate. Plus, labor force participation rates remain at very low levels."
Those figures, coupled with meager wage growth, indicate the U.S. labor market is still far too weak several years into what is officially an economic recovery.
"This is a recovery that has passed over far too many people," Pressman said.
Today's February jobs report release lends support for a Federal Reserve interest rate hike sooner than expected. An interest rate hike, not seen since 2006, is now squarely on the table for June.
"The Federal Reserve is on track to raise interest rates sometime this year," Pressman said. "I don't see anything in today's jobs report to alter their decision."
The central bank said in late December it would be "patient in beginning to normalize the stance of monetary policy." The Fed added this new language was consistent with earlier statements that it plans to keep interest rates low for a "considerable time," which it also kept.
The Fed has maintained it won't start raising interest rates until its dual mandate of full employment and price stability had been hit. The central bank defined full employment at 5.2% to 5.6%. It pegged price stability at an annual inflation range of 1.7% to 2%.
The unemployment rate has dropped to its desired range. Inflation, meanwhile, isn't likely to move higher until wages go up significantly. Yet Fed Chairwoman Janet Yellen has stated a tightening jobs market will eventually push wages higher. In turn, that will increase demand by consumers making more money, lead to higher prices, and eventually a healthier inflation rate.
Most analysts look for this to occur in the second half of 2015 and into 2016. Hence, an interest rate increase.
Pressman, however, believes higher rates will slow economic and wage growth. It all comes back to high debt levels. Credit cards and auto loans have picked up significantly since 2008. The latest data from Experian shows the amount of auto loans in Q4 2014 climbed by $86 billion.
Auto loans to subprime borrowers, people with credit scores at or below 640, have more than doubled since the financial crisis. One in four new auto loans have been to subprime borrowers.
Higher interest rates, Pressman stresses, will only make it harder for many people to dig out of their debt, spend more money, and stimulate the economy.
Been there, done that.
103,620 U.S. layoffs in 2015, and counting: While the government reported jobs data tries to show an improving economy, more and more U.S. and global companies are trimming their workforce. Go here to see which big-name companies are cutting thousands of jobs...
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