U.S. job growth likely slowed to a five-month low in February as the weather-related boost in the prior two months faded, workers became more scarce and tighter financial conditions began to weigh on the labor market.
The U.S. Labor Department’s closely watched monthly employment report on Friday could show moderation in employment growth, in line with a slowing economy that in July will mark 10 years of expansion, the longest on record. It is likely to support the Federal Reserve’s “patient” approach toward further interest rate increases this year.
Nonfarm payrolls likely increased by 180,000 jobs last month, according to a Reuters survey of economists. This would be the smallest gain since September. Payrolls increased by a total of 526,000 jobs in December and January as mild temperatures boosted hiring at construction sites and in the leisure and hospitality industry.
Temperatures turned chilly in February, which economists said could have reversed employment gains in these weather-sensitive industries. Economists also believed the effects of a stock market sell-off and jump in U.S. Treasury yields in late 2018 restrained February hiring, as household wealth plunged by a record $3.8 trillion and many sources of capital for companies froze up, according to Federal Reserve data..
“We are due for some pay back after strong job growth over the last couple of months,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “I also think the timing is right for the tightening in financial market conditions last year to begin to affect the employment data.”
First-time applications for jobless benefits were elevated, a hint that February payrolls could surprise on the downside. Also, the Institute for Supply Management surveys showed measures of manufacturing and services sectors employment dropped in the month, while the Federal Reserve on Wednesday reported “modest-to-moderate gains” in employment in a majority of the U.S. central bank’s districts.
Though the economy grew 2.9 percent in 2018, the strongest in three years, it lost momentum as the year ended. Retail sales, homebuilding, business spending and exports all declined in December, setting the economy on a slower growth path.