Meet the Author

Peter Rupert |

Senior Research Advisor

Peter Rupert

Peter Rupert was formerly senior economic advisor in the Research Department at the Federal Reserve Bank of Cleveland. His areas of specialization include labor economics and applied econometrics.

03.14.07

Economic Trends

The Employment Situation

Peter Rupert and Cara Stepanczuk

Nonfarm payrolls increased by 97,000 net jobs in February—down from January and lower than the three-month-average increase of 156,000 jobs per month. February’s growth was the weakest since January 2005, when jobs increased by 95,000, but was only slightly below expectations. December and January payrolls were revised upward a net 55,000 jobs. The employment situation continues to show moderate growth in 2007 with continuing pockets of weakness.

Employment in service-providing industries surged in February, with 168,000 jobs added. The government (+39,000), leisure and hospitality (+31,000), and education and health services (+31,000) sectors led the group, with professional business services following close behind (+29,000). However, goods-producing industries lost 71,000 jobs, completely reversing the impact of their positive report last month. A 62,000 payroll reduction in construction destroyed the 30,000 net job gain that had been posted over the past three months in these industries and did the most damage to total employment. Downswings in residential construction and adverse weather conditions across the nation were two explanations proposed for the slide. Manufacturing continued to soften, losing 14,000 jobs; durable and nondurable goods producers both posted weak numbers (-7,000 jobs each).

Labor Market Conditions

  Average monthly change
(thousands of employees, NAICS)
2004 2005 2006 Jan. 2007 Feb. 2007
Payroll employment
172
212
189
146
97
  Goods-producing
28
32
9
26
–71
  Construction
26
35
11
28
–62
  Manufacturing
0
–7
–7
–2
–14
    Durable goods
8
2
0
–19
–7
    Nondurable goods
–9
–9
–6
17
–7
  Service-providing
144
180
179
120
168
  Retail trade
16
19
–3
25
7
  Financial activities*
8
14
16
4
8
  PBS**
38
57
42
26
29
    Temporary help svcs.
11
18
–1
3
–12
  Education and health svcs.
33
36
41
30
31
  Leisure and hospitality
25
23
38
22
31
  Government
14
14
20
15
39
  Average for period (percent)
Civilian unemployment rate
5.5
5.1
4.6
4.6
4.5

*Financial activities include the finance, insurance, and real estate sector and the rental and leasing sector.
** PBS is Professional Business Services (professional, scientific, and technical services, management of companies and enterprises, administrative and support, and waste management and remediation services).
Source: U.S. Department of Labor, Bureau of Labor Statistics.

Employment losses in goods-producing industries this month were in line with the pattern of employment since the 2001 recession. During the recession itself, that is, from the peak of the previous business cycle to the cycle’s lowest level of employment (August 2003), goods-producing industries lost 2.7 million jobs. The manufacturing sector was the main drag, cutting 2.5 million jobs. In contrast, service-providing industries added 22 million jobs during the same period; they were buoyed by education and health services, which added 1.2 million jobs.

In the subsequent period of employment recovery, from the lowest level of employment to the point where employment finally returned to prerecession levels (January 2005), goods-producing industries added a meager 270,000 jobs, while service-providing industries added 2.4 million. During the current employment expansion, service-providing industries have continued to drive the headline number, growing by 4.4 million jobs. Professional business services account for 1.2 million, and education and health services account for 951,000 of that increase. Goods-producing industries have not yet caught up with prerecession employment levels, and have added only 507,000 jobs since January 2005. While construction has been strong, manufacturing has struggled to regain footing in today’s economy.

Payroll Changes By Industry During the Recession and Expansion

  Jobs, thousands
Initial loss Subsequent gain Net to recovery Current expansion
Apr. 2001
to
Aug. 2003

Aug. 2003
to
Jan. 2005

Apr. 2001
to
Jan. 2005

Jan. 2005
to
Feb. 2007

Total
–2686
2640
–46
4952
Goods
–2708
270
–2438
507
Services
22
2370
2392
4445

Source: Department of Labor, Bureau of Labor Statistics.