Employers added 273,000 jobs and the jobless rate fell back to a half-century low in February, signs of labor-market strength before the novel coronavirus started to spread in the U.S. Jeff Sparshott, Greg Ip and Eric Morath here with analysis and highlights.
Mighty Momentum
While the strong job market described by February’s report won’t save the economy from the coronavirus, it will help in three ways. First, the acceleration in job growth these past two months, accompanied by a rise in hours worked and growth in hourly pay, means weekly wage income grew a solid 4.8% from a year earlier. This series is volatile and only back to its trend of a year earlier, but it means workers who have jobs and aren’t staying home have the means to spend. Second, the very tight labor market means firms who might otherwise lay off workers because of virus-related sales declines are more likely to keep them. Third, workers who are laid off are more likely to find alternative work in such a tight market. —Greg Ip
KEY THEMES
Rearview Mirror
The latest jobs report was unabashedly strong. U.S. employers added an average of 243,000 jobs in February, January and December—the best three-month stretch for job creation since the summer of 2016.
Unseasonably warm weather in much of the country may have helped spark better construction hiring, an industry which added more than 100,000 jobs total in three months. The public sector also pushed the gains. All levels of government added an average of 38,700 jobs each month.
Even the beleaguered mining and manufacturing sectors managed to add jobs, giving goods-producing sectors a much-needed shot in the arm. It’s possible that U.S. factories were ready to turn a corner after a rough 2019, when sluggish global growth and trade tensions held down activity.
Manufacturing may be vulnerable to coronavirus-related supply chain disruptions. But be sure to keep a close eye on the service sector as well: “Many of these industries, such as leisure and hospitality, are among those most likely to be affected by the coronavirus and related fears,” said Indeed Hiring Lab economist Nick Bunker.
The share of the prime-age population with a job ticked down but was still close to the highest level since 2001.
And the unemployment rate slipped back to a 50-year low. The decrease, however, reflected both positive news—more Americans landed jobs last month—and negative—the number of Americans in the labor force, those working or seeking work, decreased. The broadest measure of unemployment has ticked higher each month this year, most recently because of small increases in the share of discouraged workers and those who want a full-time job but are stuck in a part-time position.
There remained one mystery: hourly pay. A tight labor market should force employers to compete by offering higher wages. But average hourly earnings of private sector workers—a narrower measure than aggregate weekly earnings—advanced 3% in February from a year earlier, matching the smallest annual increase since July 2018. Year-over-year raises were 3.5% as recently as August 2019. Annual gains have mostly eased since then, save for a slight bump in January which may have reflected minimum-wage increases in many states.
“Wage growth was a black spot in today’s report, dropping to a disappointing 3% and continuing a deceleration from early 2019. Despite the hot job market, American workers have yet to see wages accelerate.” —Daniel Zhao, Glassdoor
At the end of the day, what does the latest report mean for policy makers? Not much. “The implications of today’s jobs report for Fed policy are nugatory. We continue to expect a 25bp cut at the March meeting,” J.P. Morgan Chase’s Michael Feroli said. But it does show the labor market had plenty of juice heading into a potential coronavirus-related soft patch.
TWEET OF THE DAY
[wsj-responsive-sandbox id = "0" ]WHAT ECONOMISTS ARE SAYING
“Policymakers and investors should take one last good look at the February U.S. employment data because it effectively represents the end of the multi-year string of strong monthly jobs reports.” —Joseph Brusuelas, RSM US
“The U.S. economy was in very good shape before the coronavirus hit.” —Paul Ashworth, Capital Economics
“The U.S. economy is at a crossroads. The fundamentals are strong, as the February jobs report indicates. … But if supply chain disruptions lead to a drop in manufacturing output or tourism drops off, the economy could be in trouble.” —Gus Faucher, PNC Financial Services
“The economy appears to have enough positive momentum to slow for a time without significant risk of tipping into recession.” —Jim Baird, Plante Moran Financial Advisors
“The most upbeat observation we can make now is the economy at least entered the year with lots of momentum, and that should not be dismissed given the age of this expansion and what it’s about to face from this fast spreading pathogen.” —Bernard Baumohl, The Economic Outlook Group
from Real Time Economics https://ift.tt/32URfxr
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