The February jobs report was a mixed bag. Let’s get the bad news out of the way: the economy added only 20,000 positions, the smallest gain since September 2017. The number was much lower than last year’s average monthly amount of 223,000 and far below expectations for 190,000.
What explains the drop? There is no single answer, but here to help us break it down is Chip Cutter, a reporter at the Wall Street Journal who recently worked on a story called, How America Works: Inside the Hottest Job Market in Half a Century.
Some possible culprits include a statistical anomaly, exaggerated by seasonal oddities that are unlikely to persist; spooked employers, who sat on their hands as growth slowed in the beginning of the year amid the government shutdown; bad weather, which hurt construction and maybe just a weird one-off, much in the same way that the huge January number may have also been an outlier. In fact, if we take the first two months of the year, job creation averaged about 165,000, an amount that would be consistent with a slowing economy in Q1.
However, there was also good news. Average hourly earnings increased by 3.4 percent from a year ago, the best annual gain in almost a decade (April 2009). Additionally, the headline unemployment rate returned to 3.8 percent, which is where it was before the government shutdown.
Finally, the broad measure of unemployment (aka “U-6”, which includes unemployed; discouraged and marginally attached workers; and those who are working part-time, but seek full time) declined to 7.3 percent from 8.1 percent, its lowest point since December 2000. These numbers seem to indicate that the labor market may be slowing this year, but it is still relatively tight and healthy.
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