United States: Weak February jobs report nonetheless sees wage pressures rising; confirms strong January reading
March 8, 2019
The February jobs report released by the Bureau of Labor Statistics (BLS) shows payrolls barely budged in the month after a strong start of the year, adding to concerns about an economic slowdown. Non-farm payrolls increased just 20,000 after data revisions confirmed an impressive 311,000 jobs gain in January (previously reported: +304,000). The print missed analysts’ expectations of 175,000 jobs. However, this preliminary estimate is subject to significant revision, and the three-month average payroll gains in February was still at a respectable 186,000, which was just under the 200,000 average recorded in the 101 months of the current expansion.
Nevertheless, the February print showed some signs of weakness in certain sectors. The industrial sector notably shed 32,000 jobs due mostly to layoffs in construction following a strong print in January, while mining also shed jobs and employment growth in manufacturing stalled. As for services, headcounts fell in retail trade and transportation and warehousing and confirmed relatively muted employment dynamics in these sectors. Meanwhile, job gains in education and health services as well as leisure and hospitality, which had been strong in past months, also fizzled in February. On the flipside, professional and business services continued to post solid gains. Overall, averaging the payroll growth of January and February yields a less grim picture, but still does hint at some loss of momentum in the domestic economy so far in Q1.
Meanwhile, the unemployment rate dipped to 3.8% in February from 4.0% in the previous month, but this was largely due to the effects of the government shutdown which ended 25 January—and made the unemployment rate tick up 0.1 percentage point in the prior month. The real positive news came from earnings data, which showed a strong 0.4% month-on-month gain in hourly earnings, up from 0.1% in January. This brought up year-on-year wage growth up to 3.4%, from 3.2% in January and beating expectations of 3.3%. This underscores that a rock-solid labor market is still largely underpinning the domestic economic engine so far this year.
Author: Joffrey Simonet, Economist