February’s smaller-than-expected jobs gain may put investors on edge, but underlying details show there isn’t much to fret about.
Nonfarm payrolls rose 20K, missing consensus estimates of 180K by the widest margin since March 2015. While the headline number is disappointing, it isn’t as surprising when considering recent strength in payrolls. As shown in the LPL Chart of the Day, January’s payroll gains were revised upwards to 311K for the biggest two-month increase in jobs created in 2.5 years.
There were also signs of weather-related weakness in the February jobs report. About 390K non-agricultural employees were unable to work because of weather conditions last month, the highest total since January 2018 and well above the February average.
“While payroll growth has slowed, jobs gains over the past few months have been unexpectedly strong,” said LPL Research Chief Investment Strategist John Lynch. “Labor market strength remains a bright spot in the U.S. economy, and wages are growing at a healthy pace.”
Average hourly earnings grew 3.4% year over year, around the fastest pace of the cycle. Wages have been one of the most telling job-market indicators to us, as year-over-year average hourly earnings growth historically has reached 4% before it threatened economic output.
The unemployment rate dropped to 3.8% after it ticked up to 4% in January. The participation rate hovered around its highest point since 2013, indicating that more participants have been enticed by solid labor market conditions to enter the workforce.
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