US Employment Situation Report: One month is not a trend

Job creation fell dramatically in February. Is that an indication that the global slowdown is curbing US growth? Alternatively have employers pulled back temporarily from hiring after last year’s robust expansion or they are having problems finding workers?  Wage growth, jobless claims, unemployment and other indicators point to a still healthy labor market and economy.  

Non-farm payrolls added 20,000 new positions last month, far below the 180,000 forecast and January’s revised 311,000 hires. The yearlong wave of rising employment peaked in January with an average of 234,900 over the prior twelve months, the highest since August 2015.

FXStreet

Average hourly earnings rose 0.4%, ahead of the consensus estimate at 0.3% and January’s 0.1% increase. On the year wages gained 3.4% up from 3.2% in January and the best annual improvement in almost a decade. 

Reuters

The U-3 unemployment rate which limits the category to people who have looked for work in the month prior to the survey fell 0.2% to 3.8%. The so-called underemployment or U-6 rate which includes anyone who has looked for a job in the past year fell to 7.3% from January’s 8.1%.

Reuters

Manufacturing payrolls rose 4,000 less than the 11,000 expectation but the January total was adjusted higher to 21,000 from 13,000. The 12-month moving average moving average reached 24,166 last July, the largest increase in factory employment in over two decades.

Reuters

Markets took the disappointing jobs numbers in stride. Initial currency reactions were negative for the dollar with the euro gaining 25 points to 1.1245 and the yen rising about 40 points to 110.77 but the move soon lost energy and both pairs finished well within their recent ranges, the yen at 111.15 and the euro at 1.1240.

Equities also recovered from their early losses with the Dow losing just 22.99 points to 25450.24 and the S&P 500 shedding 5.86 points to 2743.07

Non-farm payrolls have a relatively volatile history. The range in 2016 was from 15,000 in May to 336,000 in July. In 2017 the spread was between 18,000 in September to 260,000 in October. Last year, one of the best in the last two decades, saw a low of 100,000 in September and a high of 330,000 in February.

With global economic growth slowing, the US-China trade dispute and the British exit from the EU still unsettled, US holiday sales undetermined and preliminary indications from the AtlantaFed GDPNow program showing a large drop in first quarter US growth to 0.5% there are good reasons to be wary.

There are also signs, from the recoveries in consumer and business sentiment after the shutdown and the burst of new orders in the service sector to the near record lows in initial jobless claims, that the recent statistical variation is the normal back and forth within a healthy economy.

One month is not a trend even if it has caused a notable increase in market attention.