The breakneck pace of hiring slumped in February, a sign that U.S. growth is cooling, though strong wage growth and earlier robust job gains suggest the economy’s near decadelong expansion will endure. U.S. nonfarm payrolls rose a seasonally adjusted 20,000 in February, the Labor Department said Friday, marking the slowest pace for job growth since September 2017—when hurricanes skewed hiring patterns—and falling well below economists’ expectations for 180,000 new jobs.
Some of February’s weak job growth might have been a response to strong hiring in previous months. Payrolls grew 311,000 in January and 227,000 in December. The three-month average for job gains clocked in at 186,000, near the average for much of the expansion.
The unemployment rate dropped to 3.8% in February from 4% the month before, returning to a level last seen in October. Wages grew at the fastest pace in nearly a decade. For months, strong U.S. job growth has been a counterpoint to other economic disturbances, including a partial federal-government shutdown in late December and January, a sputtering U.S. housing sector and a global economic slowdown.
“The labor market has really stood out as the lone bright spot in a sea of more mixed measures,” said Scott Anderson, chief economist at Bank of the West. The latest report, he said, “is just catching up” to the mixed economic picture.
Jobs were weak in some seasonal industries that snapped back from big gains in previous months, including construction, retail and hospitality. Construction employment fell 31,000 after rising 53,000 the month before. Leisure and hospitality jobs were flat after rising 89,000 the month before. Manufacturing employment stayed positive for the 19th straight month, the longest run of gains since the mid-1990s. But payroll growth in the sector slowed, possibly reflecting crimping effects from global trade tensions.
Doug Smoker, president of Indiana-based boat manufacturer Smoker Craft Inc., said U.S. steel-and-aluminum tariffs enacted in 2018 drove up boat prices and hurt business with dealers, an important customer base. Retaliation from Canada further squeezed the company’s sales. If not for tariff-induced uncertainty, Smoker Craft would be in hiring mode, Mr. Smoker said. Instead, it has left some positions open and allowed its workforce to contract 5%.
“There seems to be some light at the end of the tunnel from what we’re hearing about China and all this other stuff,” he said, referring to news reports that the U.S. and China could reach a trade deal, “but we really don’t know.”
Some economists said Friday’s report exaggerated the extent of weakness sweeping the job market. Federal workers might have been counted twice in January, when payrolls were so strong, if they took additional part-time work during the shutdown, said Diane Swonk, chief economist at Grant Thornton. Those same workers who returned to their jobs in February would only be counted once, depressing the overall number.
“The headline is certainly a bit of a head fake. The underlying trend is still solid,” Ms. Swonk said. The payroll estimate is closely watched by investors because it is one of the most comprehensive numbers produced by the government on how the economy is performing and it is timely, coming just a few days after month-end.
Apple iPad Pro (11-inch, Wi-Fi, 256GB) — Space Gray (Latest Model) — Limited Time Offer — Free International Shipping
Stocks fell sharply initially after the report, but investors pared the losses later in the day. The Dow Jones Industrial Average fell 22.99 on the day, or 0.09%, to 25450.24.
The Labor Department report was striking in part because it happened as new signs flashed of a global slowdown, worrying central banks. The European Central Bank this week cut its estimate of how fast Europe will grow in 2019 and introduced new stimulus measures. Beijing also has ramped up efforts to boost China’s slowing economy.
For its part, the Federal Reserve has for now shelved plans to raise interest rates. Friday’s report likely reinforced the inclination of many officials to avoid changing rates for at least a few months while they asses how the economic outlook evolves.
Categories: Economic Indicators