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March 8, 2019 Blog 1 min read
Labor conditions had remained firm as growth slowed, but the February jobs report showed some cracks. The result? The March report just became much more important.

3-8-19 Employment Situation Chart

Job creation ground to a near halt in February, as the economy added only 20,000 jobs to payrolls for the month, easily the worst single-month result since September 2017, falling well short of expectations for a gain of around 180,000. Revisions to the two preceding months added 12,000 jobs, modestly blunting the degree of the shortfall.

Weakness was widespread, but an outright reduction of 31,000 construction jobs and flat to slightly negative results in retail and leisure hospitality (the latter of which was a key contributor to job gains in recent months) were particularly noteworthy.

Taken alone, the February payroll number was disappointing, but came on the heels of a January gain was a solid surprise to the upside, topping 300,000 for the first time in nearly a year. Job creation over the past three months remains solid at an average 188,000, although the 3-month trend rate has slowed in recent months.

Setting aside slower job creation, overall labor market conditions remain relatively tight. The jobless rate declined to 3.8% from 4.0% in January, as the number of unemployed workers declined alongside some shrinkage in the labor force.

Consistent with other recent indications, wage pressures also continue to build. Average hourly earnings rose by 0.4% last month and increased by 3.4% over the past twelve months. Absent a more sustained slowdown in job creation, stronger wage growth appears likely to continue.

As the economy slows, a reduction in the pace of job creation is to be expected. It seems likely that both the unexpectedly strong payroll gain in January and the surprisingly weak result in February were both anomalies. The real question is the degree to which job creation softens alongside the deceleration in the pace of growth in the broad economy. The relative stability in jobless claims provides some reassurance. Still, the stakes have been raised and the importance of the March jobs report just increased meaningfully.

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