There was a lot of important information on the U.S. economy released this week, but the biggest data point is without a doubt the latest monthly job report from the Bureau of Labor Statistics (BLS) out this morning. Indeed, total nonfarm employment in America rose by just 20K payrolls in February, the smallest gain since September 2017. The significant slowdown in hiring is not too surprising following January’s surge in job creation and in many ways was also expected given the business survey data mentioned on the blog earlier this week. Construction and retail separations were the biggest detractors from February’s payrolls report, but this was still the 101st consecutive month of net job growth in America, a new record.
Further, the above-trend employment gains seen in December and January were revised even higher today, resulting in a 3-month average payrolls increase of 186K, well above what is needed to keep up with population changes. Other highlights include that the official measure of unemployment (U-3) fell to 3.8 percent, a cycle low, and underemployment (U-6) plunged to just 7.3 percent, the best reading since 2001. Altogether, the big slowdown in headline payroll growth for now still seems like nothing more than an expected side effect of a tight labor market where employers simply cannot find enough skilled workers to fill all of their vacancies. Boosting pay is one way for businesses to address the labor shortage, and average hourly earnings for production and nonsupervisory workers in February rose at an annual rate of 3.5 percent. That matches the fastest pace of wage growth recorded since 2009 and is something that will eventually put upward pressure on consumer inflation. Following the softer hiring print, though, the market now thinks that the Federal Reserve is more likely to cut interest rates in 2019 than proceed with another hike.
Sources: Econoday, U.S. DoL, Twitter, Bloomberg, FRBSL
Post author: Charles Couch