Household Survey Employment/Labor Force (CPS)

For February, the Household Survey plunged by a whopping 588,000, the largest single-month drop since December 2023. people leaving the workforce. Full-time employment cratered by an astonishing 1.2 million, only partly offset by a 610,000 increase in part-time positions. The lack of jobs meant the official labor force also fell sharply, down 385,000 in February leaving the tally of officially unemployed to rise by only 203,000. As a result, the unemployment rate increased by the slimmest margin, from 4.0% to 4.1%. The participation rate slid all the way to 62.4%, lowest in two years and when accounting for those who dropped out of the labor force, unemployment would have been 4.7% instead. Echoing that, the BLS’s own estimate for underemployment soared by a half point to 8.0%, highest since October 2021.

Interpretation

The February employment report was a disaster of a US labor market, whereas the headline payroll growth seeming somewhat positive if below expectations, the rest of everything indicated at best persistent weaknesses, with a growing number displaying alarming results. According to the Household Survey, while the overall unemployment rate remains at 4.1%, it hides a much bleaker reality when considering broader measures of labor underutilization.

The crash in employment was only the start. Following it, the plunge in full-time jobs meant that in addition to a net 588,000 positions lost on the month, another 600,000 or so had their status downgraded from full-time to part-time. In other words, the same as CES and its hours data, meaning significant corroboration between the two series on this aspect of employment.

This phenomenon is a hallmark of labor market distress and is particularly alarming when seen alongside the U-6 measure of underemployment, which soared to a new high of 8%. The U-6 rate encompasses not only the unemployed but also individuals who are underemployed or marginally attached to the labor force. Its increase reflects the growing prevalence of workers stuck in part-time or temporary jobs despite seeking full-time employment, which is a sign of deteriorating job quality in the economy.

Further deepening the issue, the labor force participation decreased by 385,000. When these dropouts are factored in, the effective unemployment rate works out closer to 4.7%. This reflects a substantial hidden pool of individuals who, while not officially classified as unemployed, face significant challenges in finding stable, full-time employment and are discouraged enough by them to simply give up even looking for work.

The contraction in the Household Survey, rising underemployment, declining full-time jobs, and stagnation in working hours suggest that February was a disaster in employment. Sadly, the mainstream conversation revolves entirely around the one payroll figure and not even the full CES let alone acknowledging what the full labor data shows.