Long-Term Unemployment Remains High Despite Strong February Job Gains

The Bureau of Labor Statistics’ February jobs report showed continued growth in the labor market. The payroll survey reported that employers added 242,000 net new jobs last month. The payroll survey showed unemployment remaining unchanged at 4.9 percent.

Even more encouragingly, unemployment stayed flat despite over half a million (+555,000) new workers entering the labor force. In the aggregate, almost all these new labor force participants found jobs. As a result, the labor force participation increased 0.2 percentage points to 62.9 percent—its highest level in almost two years. Although labor force participation remains well below pre-recession levels, it has moved in the right direction since the fall.

The establishment survey showed job gains concentrated in a few sectors: Retail trade (+55,000), health care and social assistance (+57,000), and leisure and hospitality (+48,000) accounted for two-thirds of the net job gains. The mining sector continued to contract, with the job losses (-18,000) driven primarily by lower energy prices reducing the demand for domestic drilling. Revisions to the December and January surveys also revealed that employers created 30,000 more jobs than previously estimated.

However, not all aspects of the labor market improved. Average hourly wages declined 3 cents in February. Over the past year, average hourly wages had risen 2.2 percent. (This low nominal growth is partly driven by low inflation—over the same period, inflation grew 1.3 percent). Average work hours also fell: The length of the average work week dropped by 0.2 hours.

Worse, the number of Americans stuck in long-term unemployment did not budge despite the robust job growth. In February, 2.2 million unemployed workers had been searching for work for at least six months. In the aggregate, the new hiring did not reach the long-term unemployed. This explains why the average duration of unemployment remains stuck at almost seven months (29 weeks).

Although the economy has improved over the past year, the labor market remains considerably weaker than before the recession.