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U.S. Added 273,000 Jobs in February Before Coronavirus Spread Widely
Jobs Report for February: Here’s What to Expect
(about 5 hours later)
For the second month in a row, the economy churned out a blockbuster number of jobs, the government reported Friday, an impressive performance in an era of slow-and-steady employment growth.
The Labor Department will release hiring and unemployment figures for February at 8:30 a.m. Eastern time. Here’s what to watch for:
With the coronavirus outbreak shaking economic confidence, the solid showing in February may not be a harbinger of continued strength.
Wall Street analysts expect a falloff from the previous month’s strong performance, with payroll gains of roughly 165,000, down from the 225,000 initially reported for January.
Still, the report from the Department of Labor offered a refreshing breath of positive economic news. Employers expanded payrolls by 273,000 jobs in February, while revisions to data from previous months added 85,000 more jobs to the tally. The jobless rate ticked down to 3.5 percent.
The unemployment rate is expected to drop to 3.5 percent.
“It’s certainly a relief that we had a strong tailwind,” said Diane Swonk, chief economist at Grant Thornton. “Service, leisure and hospitality, these are all very vulnerable. The good news is that these workers had some cushion ahead of time. It helps blunt the blow.”
Average hourly earnings are predicted to rise by 0.3 percent, after moving up 0.2 percent the previous month. That would push the year-over-year increase down to 3 percent.
Indeed, the report is evidence of just how much momentum the American economy had going into the coronavirus crisis. Monthly payroll gains averaged 231,000 over the past six months. The average for the previous six months — March through August 2019 — was just 171,000.
Every jobs report looks backward, but the February data captures a particularly unusual moment, before the market was gripped with anxiety about the global economic impact of the widening coronavirus outbreak.
“JOBS, JOBS, JOBS!!!” President Trump wrote on Twitter.
The government’s estimate of payroll increases is based on surveys of companies completed by the middle of the month, when the prevailing sentiment was that the health and economic effects would be contained and the United States would remain relatively unaffected.
Every jobs report looks backward, but February’s report captures a particularly unusual moment, before the market was gripped with anxiety about the global impact of a widening epidemic.
To Ian Shepherdson, chief economist at Pantheon Macroeconomics, the value of this report is that “it gives us kind of a benchmark of where we were before things began to go wrong.”
“There is a red line in the calendar,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “The value of it is that this report gives us kind of a benchmark of where we were before things began to go wrong.”
A clearer picture of the impact on the labor market from disrupted supply chains or changes in travel, entertainment and dining plans should emerge over the next couple of months.
The government’s estimate of payroll increases is based on surveys of companies completed by the middle of the month, when the prevailing sentiment was that the United States would remain relatively unaffected.
The result is that Friday’s report can be interpreted to suit anyone’s sentiments.
“The risk is that the market will downplay a good number and exaggerate a bad number,” said Lee Ferridge, head of macro strategy for North America at State Street, a large financial institution based in Boston.
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A clearer picture of the impact from disrupted supply chains and travel, entertainment and dining plans should emerge over the next couple of months.
“If it’s a decent number, the market’s going to be ‘Yeah, that was before the situation deteriorated,’” he said. “And if it’s a weak number, the market reaction will be ‘Oh, we were weakening before it started getting worse.’”
There were scattered reports this week about a potential downturn in employment particularly in the most vulnerable sectors: transportation, hospitality, entertainment and travel.
The average weekly hours worked may indicate whether supply chain disruptions linked to the outbreak are cutting into production.
Airlines are clearly feeling the squeeze. This week, United Airlines announced that it was imposing a hiring freeze through June, postponing scheduled merit raises and inviting employees to apply for unpaid leave.
“Where it’s likely to affect the labor market is in reduced hours for service workers,” said Diane Lim, an economist at the Penn Wharton Budget Model. “Entertainment, hospitality, food and lodging, service jobs — they won’t lose their jobs but will probably get a cut in hours.”
The number of canceled or postponed conferences is racking up, which hurts not only hotels and convention centers but also restaurants and stores that cater to those visitors.
Over the last few months, the average number of hours worked a week has been 34.3. If it were to fall, “that would be a very negative signal to me,” Mr. Ferridge of State Street said. The last time it hit 34.2 hours was in January 2011.
“Layoffs are here,” a respondent in the transportation equipment sector said when surveyed by the Institute for Supply Management for its monthly manufacturing report.
In 2019, year-over-year wage growth reached 3.5 percent. In recent months, it has not come close to that peak. The continued sluggishness despite record-low jobless rates remains a puzzle.
But so far deep dents in employment seem more feared than real.
Minimum-wage increases taking effect this year in various cities and states may start to push up earnings. But most economists expect wage gains to stay flat. “The 12-month growth rate has been chugging along at 3 percent,” said Ben Herzon, chief economist at IHS Market. “And I don’t expect anything different there.”
“We have lots of job openings, and we are adding to them,” said Rick Woldenberg, chief executive of Learning Resources in Vernon Hills, Ill. The company, which makes educational materials and toys, employs 200 people in the United States, and has at least 10 openings in sales, marketing and operations.
Diane Swonk, chief economist at Grant Thornton, said she expected that the report would reflect some retail-store closings as well as declines in manufacturing and mining. In January, Boeing suspended production of the 737 Max airplane, which had been involved in two calamitous crashes, and that move has begun to take a toll on its suppliers.
The company’s suppliers are in Guangdong, a Chinese province that has not been at the center of the outbreak. There have been a few kinks in orders and deliveries, he said, but nothing unusually serious.
There were scattered reports this week about a potential downturn in employment in the most vulnerable sectors: transportation, hospitality, entertainment and travel.
“Businesses crave certainty, and certainty isn’t the word of the day,” Mr. Woldenberg said. So he is doing what many business owners always do: managing as best as he can.
Airlines are clearly feeling the squeeze. United Airlines announced on Wednesday that it was imposing a hiring freeze through June, postponing scheduled merit raises and inviting employees to apply for unpaid leave.
“I’m just an elf at the workbench,” he said, explaining his reaction to the conflicting and confusing economic signals.
“Layoffs are here,” said a respondent in the transportation-equipment sector when surveyed by the Institute for Supply Management for its monthly manufacturing report.
Amy Glaser, senior vice president at the staffing firm Adecco, said, “We’re not seeing an impact yet.” The one trend she has noticed in the last few days is that employers are arranging for preliminary interviews to be done remotely instead of in person.
But so far, severe dents in employment seem more feared than real. The labor market has been remarkably resilient, delivering job gains for 112 months in a row despite global slowdowns, bitter trade fights and stock market gyrations.
Becky Frankiewicz, president for North America at ManpowerGroup, an employment agency, said she, too, had not seen any pullback, even in the hospitality and travel industries. The labor market is tight, she said. “We continue to see a huge demand” for temporary and permanent workers.
Becky Frankiewicz, president of North America at ManpowerGroup, an employment agency, said she had not seen any pullback, even in the hospitality and travel industries. “We continue to see a huge demand” for temporary and permanent workers, she said.
Jobless claims throughout the United States have remained at rock-bottom levels.
The labor market’s strength early this year should give the economy some cushion against the shock of the coronavirus, said Karin Kimbrough, chief economist of the professional networking site LinkedIn.
At Eastman Machine in downtown Buffalo, Robert Stevenson, the president and chief executive, said he wanted to add at least six people to his 137-person payroll.
“We had a great year last year, and business is good,” said Mr. Stevenson, who also has a factory in Ningbo, China, a coastal city south of Shanghai. In early January, Eastman got a large order from a Chinese wind-energy company that was so eager for the machinery, it recently agreed to pay the steep increase in airfreight prices that followed the cancellation of many flights to China.
For Mr. Stevenson, the labor shortage is still the most pressing problem. “Our issue is finding qualified people,” said Mr. Stevenson, who wants to expand his engineering and software staff.
The remarkable payroll gains last month were all the more surprising since cooling job creation is to be expected during the 11th year of an economic expansion.
There were a few signs of weakness in the report. Wage growth, which was already slowing from last year’s peak, was less impressive. Average hourly wages were up 0.2 percent, bringing down the year-over-year gains to 3 percent.
Diane Lim, an economist at the Penn Wharton Budget Model, said the first impact from the coronavirus on the labor market was likely to show up in reduced hours for service workers. “Entertainment, hospitality, food and lodging, service jobs — they won’t lose their jobs but will probably get a cut in hours,” she said.
So far, though, the average number of hours Americans work in a week has held up.
At Milwaukee Electronics, a Wisconsin manufacturer of circuit boards, the warnings from Asian suppliers started coming in shortly after the Lunar New Year holiday in February: Prepare for delays.
“Our component vendors are telling us to brace for shortages, potentially some substantial ones,” said Duane Benson, the company’s director of marketing.
The company has been saving up inventory, reaching out to suppliers and working with customers to adjust timelines. What it has not had to do, however, is cut jobs or reduce hours.
In the short term, the outbreak might even be good for business. The company’s Screaming Circuits division in Oregon, which usually handles smaller, shorter-deadline orders, has had a surge in inquiries from customers looking to bring production back from China, at least temporarily.
“We started getting calls from folks who typically send stuff offshore,” Mr. Benson said.
Of course, if disruptions persist, Screaming Circuits, too, might struggle to get the parts it needs to fill orders. If it has to give up business, it could be forced to make harder choices. But Mr. Benson said the company would try to avoid cutting jobs.
The strength of the labor market early this year at least gives the economy some buffer against the shock of the coronavirus, said Karin Kimbrough, chief economist of the professional networking site LinkedIn.
“I don’t think we were starting from a point of weakness,” she said. “The economy in the U.S. was pretty solid.”
“I don’t think we were starting from a point of weakness,” she said. “The economy in the U.S. was pretty solid.”
