U.S. added robust 273K jobs in February before virus escalated
By Christopher Rugaber/The Associated Press
The Labor Department said Friday that the unemployment rate fell to 3.5 per cent last month, matching a 50-year low, down from 3.6 per cent in January.
The monthly job gain comes from a survey of payrolls in the second week of February, predating the viral outbreak. So far, there are few signs that the job market has been affected by the disease, but most economists expect hiring to slow in the coming months.
Wage growth slows
Wage growth slowed slightly in February, rising three per cent compared with a year earlier, down from a 3.1 per cent year-over-year average gain in January. Paychecks have grown at a three per cent pace or higher for more than a year and a half but have slowed since reaching 3.5 per cent last summer.
If employers were to start slashing jobs as a consequence of the virus, it could significantly escalate the economic damage. For that reason, a range of job market barometers will provide some of the most vital signals about how the economy is withstanding the virus’ impact.
Widespread layoffs can transform slowdowns in just one or two sectors — the travel industry, say, or manufacturing — into a full-blown downturn for the overall economy. When workers lose jobs and pay, they typically cut spending. Their friends and relatives who are still employed grow anxious about their own jobs and wary of spending freely, a cycle that can trigger further job cuts.
So long as monthly job gains remain above 100,000 or so, the unemployment rate should stay low and the economy may be able to avoid a downturn. If the monthly pace were to sink below that level for a sustained period, joblessness would likely rise.
Pre-virus, economy was on a good pace
Before the viral outbreak struck China, shutting factories and causing shortages of parts and final products for U.S. manufacturers and retailers, the economy was expanding at a steady pace. Annual growth was 2.1 per cent in the final three months of last year.
In 2019, employers added jobs at a pace of about 175,000 a month, slightly slower than in 2018 but enough to absorb new workers and lower the unemployment rate over time.
A pickup in housing sales has supported growth, with ultra-low mortgage rates helping more buyers afford a purchase. And consumer spending, fueled by solid pay increases, has lifted online retailers, restaurants, and the broader economy.
Unemployment applications drop
The timeliest gauge of layoffs is the government’s weekly report on applications for unemployment benefits. People who are laid off are eligible for the aid. The latest data, issued Thursday, was reassuring: It showed that the number of people seeking unemployment benefits dropped 3,000 to 216,000 in the week that ended Feb. 29. That is roughly the same as the average over the past month and is a very low level historically.
The job market appears resilient for now according to several gauges. The jobs website Indeed’s data shows that companies have yet to cut their job postings, evidence that they are still willing to hire.
And on Wednesday, payroll processor ADP said companies added a healthy 183,000 jobs in February. That figure was likely boosted, though, by unseasonably warm weather that spurred hiring in construction and a category that mostly includes restaurants and hotels.
Should coronavirus worries start to depress consumer and business confidence, a broader pullback in spending and hiring could then weaken the economy.
So far, that evidence is mixed. A consumer confidence survey by survey research company Morning Consult has already shown clear declines. But a separate survey of small businesses by the National Federation for Independent Business found that about one-fifth of small companies in February planned to add jobs, unchanged from the previous month.
A survey of the Fed’s business contacts released Wednesday, known as the Beige Book, found that half the bank’s 12 districts were reporting consequences from the coronavirus. The Philadelphia Federal Reserve reported fewer tourist groups from China and said many of the city’s Asian restaurants and shops had reported declining foot traffic because of unfounded fears over the virus.
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