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US payrolls massively undershoot expectations

By Michele Maatouk

Date: Friday 08 Mar 2019

US payrolls massively undershoot expectations

(Sharecast News) - US job growth almost stalled last month, but the unemployment rate edged lower and wages grew, according to data released by the Labor Department on Friday.
Non-farm payrolls rose by a paltry 20,000, massively undershooting expectations for a 180,000 increase and down from January's revised 311,000 jump.

It wasn't all bad news, however, as the unemployment rate ticked down to 3.8% from 4.0% the month before, coming in a touch ahead of expectations for a rate of 3.9%.

In addition, average hourly earnings were up 11 cents or 0.4% in February, up from January's 0.1% rise and topping expectations for a 0.3% increase.

On the year, average hourly earnings pushed up 3.4% compared to a 3.1% jump in January and a forecast of 3.3%. This marked the biggest increase since April 2009.

Employment in professional and business services continued to trend up, with a 42,000 increase, while healthcare added 21,000 jobs in February and 361,000 jobs over the year. Meanwhile, employment in the construction industry fell by 31,000.

The Labor Department revised up the payrolls gains for previous months. The change for December was revised to a 227,000 increase from 222,000, while January's increase was revised up to 311,000 from 304,000. After revisions, job gains have averaged 186,000 a month over the last three months.

Michael Pearce, senior US economist at Capital Economics, said the sharp slowdown in payroll employment growth provides further evidence that economic growth has slowed in the first quarter, adding weight to his view that the Federal Reserve will not be raising rates this year.

Pearce said the 20,000 rise was "not quite as bad as it looks" given that it followed an unusually strong 311,000 gain in January. However, it's clear that the labour market is now losing momentum.

He said that barring the rises in healthcare and professional business services, the slowdown was broad-based.

"Manufacturing employment rose by only 4,000 while employment in most other sectors was either broadly unchanged or fell. There was also a decline in average hours worked, to 34.4 from 34.5."

Neil Wilson, chief market analyst at Markets.com, said: "This was one of the weakest readings we have seen in years and the initial market reaction has been to sell equities and the dollar as Treasuries were bid.

"Dow futures were off 200 points, while the dollar index slipped from its highs of the day. Amid fears of a global slowdown in the wake of the ECB meeting and the Chinese data, this will weigh further - but it could prove temporary."

Wilson said investors shouldn't be too worried about the reading. "You get these odd readings and when we look at the major upside blip in January, when jobs came in at above 304k, the three-month run rate remains on course. After revisions, job gains have averaged 186k per month over the last 3 months- completely in line with the long-term run rate. We can also factor in the government shutdown and the weather having an impact, with construction employment falling."

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said: "The bottom line here is that this report has something for hawks (wages) and doves (payrolls); it won't move the needle at the Fed.

"We expect better payrolls over the next few months, and wage gains will pick up further. But for now markets are mesmerised by the manufacturing crunch, so the labour data aren't going to shift rate expectations until industry starts to improve, in the summer."

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