U.S. Job Creation Is Strong as Coronavirus Worries Rise

 

Roy Maurer By Roy Maurer March 6, 2020
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Private-sector payrolls increased much more than expected in February, according to the U.S. Bureau of Labor Statistics (BLS). Notably, the monthly jobs report was compiled before the escalation of concern over the spread of the coronavirus in the United States took hold.  

The BLS reported that U.S. employers added 273,000 new jobs last month, while the unemployment rate fell back to 3.5 percent, matching its lowest level in more than 50 years. Economists had forecast payroll growth of 175,000 new jobs.

In addition to February's blowout total, the estimates for December 2019 and January were revised higher by a total of 85,000, pushing the average over the last three months to an impressive 243,000.

"As fears of the coronavirus ramp up, today's report reassured that the labor market was in a strong position heading into the unknown," said Nick Bunker, an economist at the Indeed Hiring Lab.

"The numbers were well north of any serious forecasts and it's easy to forget that this stronger-than-expected report was hardly an obvious outcome, after some recent mixed signals," added Josh Wright, chief economist for recruitment software firm iCIMS in Holmdel, N.J. "Clearly, the February jobs report provides healthy baseline vital statistics for the U.S. labor market heading into the coronavirus outbreak."

The report suggests that job gains were accelerating prior to the coronavirus outbreak, "a remarkable achievement as we close in on full employment," said Julia Pollak, a labor economist at employment marketplace ZipRecruiter in Santa Monica, Calif.

But economists worry that the epidemic could derail the longest U.S. economic expansion in history, now in its 11th year. Services industries that help drive the U.S. economy—including transportation, hospitality, restaurants and retail—could suffer the most from the spread of the virus. Fourteen people have died from the respiratory disease COVID-19 caused by the virus and the number of infections in the country has exceeded 225.

Moody's Analytics Chief Economist Mark Zandi said that he has not seen anything to suggest a hit to the labor market from the coronavirus after the February BLS survey was taken but that slowing job growth should be expected in the coming months because of the virus and also as the boost from the unseasonably mild winter weather fades.

"COVID-19 will need to break through the job market firewall if it is to do significant damage to the economy," Zandi said. "The firewall has some cracks but judging by the February employment gain it should be strong enough to weather most scenarios."

Pollak said that even if private-sector hiring "takes a hit in the coming months, any slowdown could be offset by a surge in government hiring as 500,000 Census workers are added to payrolls. Census hiring will show up in the March-July reports."

Federal employment grew by 8,000 in February.

Industry Breakdown

Growth picked up in goods-producing industries and continued to show strength in the service sectors. "Many of these industries, such as leisure and hospitality, are among those most likely to be affected by the coronavirus and related fears," Bunker said. "This forward momentum could help these industries weather this shock, but also raises the possibility that job growth may slow significantly if the impact of the virus hits these industries hard."

Glassdoor Senior Economist Daniel Zhao noted that there was little sign of any impact yet from the coronavirus outbreak in February's industry-level data.

"Manufacturing gained 15,000 jobs despite ongoing trade tensions and concerns that the coronavirus would disrupt international supply chains," he said. "Leisure and hospitality also continued its strong growth in February, adding 51,000 jobs."

Unseasonably mild winter weather bolstered hiring at hotels, restaurants and bars, and at construction sites. Construction employers added 42,000 jobs in February.

The health care industry grew by 31,000 jobs. "Health care hiring could accelerate further in the coming months," Pollak said. "At ZipRecruiter, we are seeing a surge in job postings for nurses, paramedics, medical researchers, and public health experts, which is likely a reflection of widening efforts to screen for and contain the coronavirus." 

Wright said that declines across retail trade (-7,000 jobs), wholesale trade (-2,600), and transportation and warehousing (-4,000 jobs) make it tempting "to read as an early sign of coronavirus fears, but retail has been ailing, and transportation and warehousing has been volatile."

Wages Disappoint

Average hourly earnings increased by 9 cents in February to $28.52, an increase of 3.0 percent from a year earlier. "Wage growth was a black spot in today's report, continuing a deceleration from early 2019," Zhao said. "Despite several months of a hot job market, we are still yet to see wages accelerate for workers. Unless the labor market heats up in coming months, it may be unlikely that workers see accelerating wage gains in 2020."

Uncertainty Ahead

Next month's BLS employment report will test the endurance of the labor market as the business impact of the spreading virus becomes clearer. Some believe that the global epidemic could facilitate the economic recession that's been expected for a couple of years now.

"The coronavirus outbreak has caused high uncertainty and the state of the labor market in the coming months will depend largely on how the outbreak evolves and how policymakers and businesses respond," Zhao said. "While the outbreak is likely to disrupt business operations, we continue to see companies experimenting with ways to navigate it. We're seeing reports of companies instituting work-from-home policies, replacing in-person interviews with virtual ones, and more. The ongoing health of the labor market will depend on how quickly and effectively companies can react to the outbreak and adapt accordingly."

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