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A blow-out jobs report for February

March 06, 2020

Nonfarm payroll gains of 273,000 for February along with substantial upward revisions to the two prior months suggest that the U.S. economy had significant momentum before the impacts of the COVID-19 virus. This data came from a survey in the middle of February, however, so it says nothing about what will occur in coming months, only that we are starting from a much stronger place. The weekly jobless claims – which are probably the best nearly real-time indicator of the labor market – also show that firms have not yet responded to the coronavirus, with data through the end of February.

Still, it is certainly better that the U.S. economy is in a position of strength before the impact of the coronavirus, rather than slowing.

As expected, the U-3 unemployment rate slipped back to a 50-year low of 3.5 percent as the labor force participation rate was unchanged after last month’s increase.

Average hourly earnings increased by 0.32 percent, but a one-month jump in earnings a year earlier lowered the 12-month gain to 3.0 percent – the slowest pace since mid-2018. With labor markets extremely tight, we expect this measure to show some acceleration soon, as shown by other measures of wage growth such as the Atlanta Fed’s wage tracker.

Taken together, this was an exceptionally strong employment report – but financial markets have shrugged off the positive data as market participants look ahead to the likelihood of weaker growth in coming months in response to the coronavirus.