Real Time Economics | Bad Jobs Report?

Real Time Economics U.S. employers added a scant 20,000 jobs, the unemployment rate fell to 3.8% and hourly wages posted their best annual gain in nearly a decade in February. Jeff Sparshott and Greg Ip here to take you through some of the numbers. The Unemployment Rate Says 'Don’t Worry' At first blush the job market behaved strangely in February. Nonfarm payrolls barely grew, by 20,000, far less than expected. Yet unemployment dropped to 3.8% from 4%. Payrolls are based on a survey of employers while unemployment is drawn from a survey of households. In recent months the two had moved in opposite directions, producing strong payroll growth but rising unemployment. February’s moves correct some of that divergence. Both have likely been distorted by the partial federal government shutdown and cold weather. Averaging over the last three months eliminates those distortions and sends a reassuring message: payroll growth averaged 186,000, about double its underlying demographic trend. The unemployment rate, averaged over three months has still edged up, but may be trending down again. Bottom line: the economy is slowing from last year’s robust 3% pace, but the job market gives no reason to think it’s in trouble. —Greg Ip

Key Themes For the Fed, a Little More Patience The February employment report bolsters the Federal Reserve’s decision to stop raising interest rates. Fed officials have been assessing whether market turmoil, trade tensions and a partial government shutdown at the end of 2018 left a mark on the U.S. economy. Housing, consumer spending data and purchasing managers indexes have hinted at a slowdown. A weak jobs report piles on. To be sure, the latest numbers come with an asterisk: Payrolls may have been distorted by the effects of the shutdown and severe weather. Fed officials will want to see another month of data before reaching any conclusions. But Friday’s report will make officials even more patient until data either confirm of falsify the latest blip, Nick Timiraos writes. Round Mound of Rebound During the current expansion, the labor market has delivered just a few really ugly months. The worst were followed by big rebounds. January 2011 registered a gain of 20,000 jobs, March 2011 jumped to 213,000. May 2016 was a paltry 15,000, June 2016 was 282,000. September 2017 slipped to 18,000, October 2017 hit 260,000. There's no guarantee that the pattern will repeat, but it's a reminder to look at broader trends.    Silver Linings The brightest spots in Friday's jobs report: measures of unemployment and hourly wages. For starters, the broadest measure of unemployment—which includes the discouraged and part-time workers who want full-time work—fell to its lowest level since 2001. And average hourly earnings rose at the fastest pace in nearly a decade. Weekly hours fell a little, dragging down take-home pay, but subsiding inflation should help bolster real disposable income. Gray Cloud The labor-force participation rate didn't budge—and for prime-age workers actually fell a touch. To keep growing, the economy needs to draw more potential workers off the sidelines. Winners and Losers The weak sectors of the job market last month included construction, mining and retail, while the health-care and business-services industries created jobs in February. Despite job creation stalling last month, figures from the two prior months were revised higher. What Economists Are Saying As the economy slows, a reduction in the pace of job creation is to be expected. It seems likely that both the unexpectedly strong payroll gain in January and the surprisingly weak result in February were both anomalies. —Jim Baird, Plante Moran Financial Advisors The labor market remains robust and that the economy remains quite strong despite the weak February number. —Tendayi Kapfidze, Lendingtree.com We can debate whether today’s payroll number signals a broader slowdown of the economy, but the bottom line is slack in the labor market is harder to see, especially considering the increases we have witnessed in wage data over the past few months. —Charlie Ripley, Allianz Investment Management The U.S. economy has slowed over the past three months and hiring eased along with it. —Joseph Brusuelas, RSM US This morning’s jobs report ... may be an early sign that slowing global growth, trade tensions, stock market volatility, and the recent federal government shutdown are weighing on the job market. —Andrew Chamberlain, Glassdoor The sharp slowdown in payroll employment growth in February provides further evidence that economic growth has slowed in the first quarter. That adds weight to our view that the Fed will not be raising interest rates this year. —Michael Pearce, Capital Economics