Job Growth Continues Record Streak in Trump's First Full Month

Job Growth Continues Record Streak in Trump's First Full Month

The US economy added 235,000 jobs in February, the 77th consecutive month of job gains, and added to optimism after the first full month of the new Trump administration. The news increases the expectation of a Fed rate hike next week. 

The US added 58,000 construction jobs in February |
The US added 58,000 construction jobs in February | Getty Images

After an unexpected 238,000 jobs added in January, the first full month of the Trump administration saw a similar rise of 235,000 jobs, despite February being a shorter month. Construction and manufacturing led the gains. It was the best two-month increase since July 2016. 

The unemployment rate fell one tenth of a percent to 4.7%, just above last year's low of 4.6%. More importantly for the Fed's decision, wages grew 2.8% from a year ago. The Fed's twin official mandates of controlling inflation and facilitating job creation have a third unofficial one: the jobs being created should not cause median wages to decline but grow. 

After previous recessions, prior to the big one of 2007-2009, a pattern emerged in which some jobs were lost to automation or offshoring. Often the new jobs created during the recovery did not pay as well. As a result of this phenomenon, along with other factors, wages in the US (adjusted for inflation) peaked in the early 1970s and have mostly declined since then. At the same time, working hours and productivity have increased. The net effect is that people are working harder but making less, in real buying-power terms, than they were a generation ago. 

That's why the Fed has placed such emphasis on median wage growth and why it has waited to see it taking place before raising rates. Now that we have clear signs of it, the futures markets are showing a very strong probability of a rate hike. On Nadex, interest in the Fed Funds binary option contract appears to have grown as well. Dan Cook, director of business development, just told me he has received a record number of calls about the Fed Funds binary in the last 48 hours. 

You can't deny this effect of global warming

February 2017 was the second-warmest February in the US since 1895. Here in Chicago, we had no snow at all in January and February, another record. The result is that the number of people unable to work because of inclement weather was way down. On average, 311,000 people nationwide are not able to work in February because of bad weather. This February, the number was just 157,000. Compare that to 395,000 in January. 

It wasn't just people going back to their usual jobs that made the difference. Construction jobs, which can appear and disappear on short notice depending on the weather, increased by 58,000 after rising 40,000 in January. That's the strongest construction work growth in nearly a decade.

The unseasonably warm and dry weather was a major reason for that difference. Manufacturing payrolls also gained 28,000, the biggest gain since 2013, as transportation and delivery faced fewer weather delays. Pres. Trump has called climate change a "hoax" and appointed officials who deny that it's real, but we can't deny that global warming in the last few years has been a boon to the construction industry as well as other industries.

For example, jobs in solar energy last year surpassed jobs in oil, gas, and coal and the trend is expected to continue. As the new administration and Congress begin to implement new policies, job creation may need to draw on new markets and industries, different than those which have fueled the post-crisis recovery so far. But for now, the 235,000 marked a healthy start and great news for a new president, who retweeted the headline from The Drudge Report: "GREAT AGAIN: +235,000."

The president has announced a goal of adding 25 million jobs over the next 10 years, more than were created during the 1990s. To do that, the economy would have to create 208,000 jobs a month on average. Surveys of economists predict an average monthly gain of 171,000 jobs, with some saying February's boost was, again, partly due to weather speeding up construction hiring that was planned for March and April. 

We'll know in a month if the economy has another month of 200,000+ job growth to offer. By then, we may well have higher interest rates with more rate increases in the pipeline. This will put added scrutiny on new legislation, such as the replacement of Obamacare and next year's federal budget, all of which can impact job growth. 

Nadex offers one of the simplest ways for individual traders to directly trade their opinions about where unemployment numbers are heading. We offer binary options on the weekly jobless claims number, the monthly nonfarm payroll number, and the Fed Funds rate. They are simpler to trade than the futures, in that you get guaranteed risk protection without a stop loss. They cost less than $100 per contract. And they offer a way to trade the numbers themselves, rather than (or in addition to) the market's reaction to those numbers. 

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