February Jobs Report: fire before the coronavirus storm

The February Jobs Report, issued by the U.S. Labor Department, was mostly a continuation of the last several months, despite exceeding the 175,000 non-farm jobs that was predicted by many economists’ and, the increase to 275,000, with an unemployment rate of 3.5 percent was pre corona virus, which has made the report mostly irrelevant as fears of the virus, or Covid-19, puts that in sharp relief against a background of fears of illness, and worldwide deaths.

Some good news was that “Employment gains for January and December, meanwhile, were revised up by a combined 85,000. The government raised the increase in new jobs in January to 273,000 from 225,000. December’s gain was lifted to 184,000 from 145,000,” reported Marketwatch.com.

With an increased fear of a pandemic, the Federal Reserve Board of the United States, issued a half-point interest rate cut, the first since 2008, and while the move might have soothed the nerves of investors, it was not long lived as 10 year treasuries dipped at the end of trading that day to less than one percent, further sharpening concerns, since a it can be a goal post of economic health, as well as consumer spending.

Earlier concerns were still present in February: wage earnings of 3.0 percent, year over year despite the tagline of a 50 year low; and, one which is getting tattered as the months roll on.

Some easing of the global market was presaged due to the Trump Administration’s easing of trade concerns with China, but most observers had posited that as political cover for the 2020 presidential campaign.

The Washington Post reported that “Global markets have shown volatility and fallen sharply as investors have monitored the coronavirus’s dampening effect on manufacturing, travel and consumer spending. Analysts are predicting that global growth this quarter could slow to the lowest levels since the financial crisis.”

The grounding of the 737 Max is still an important component of U.S. and global economic concerns, and continued to dim the lights on what some wanted to see as confirmation of an expansive U.S. economy.

Private employers, a few days prior, had reported 183,000 jobs created, coming close to federal market predictions and there was seen as a positive trend, albeit compromised and their underlying statement, diplomatically stated, “The labor market remains firm, as private-sector payrolls continued to expand in February,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “Job creation remained heavily concentrated in large companies, which continue to be the strongest performer.”

Adhering to that same mood, ADP reported “that Mark Zandi, chief economist of Moody’s Analytics, said, “COVID-19 will need to break through the job market firewall if it is to do significant damage to the economy. The firewall has some cracks, but judging by the February employment gain it should be strong enough to weather most scenarios.”

While Zandi seems to be undertaking a positive chord, the winners in the report, leisure and hospitality at a plus of 53,000, are expected to take a nosedive this month with the cancellation of international conferences both in the U.S. and abroad, and Chicago cancelled the International Housewares Show, at McCormick Place, and in Texas South-by-Southwest has also been cancelled, with the expected dent in the profits of not only airlines, but also Visa’s credit card business.

Airlines are feeling the pinch, and United Airlines announced that it began a hiring freeze through June, “postponing scheduled merit raises and inviting employees to apply for unpaid leave, said The New York Times.

“Global airline stocks have shed $41 billion in value, or 25 percent of the sector’s market cap, in the past month. The International Air Transport Association is predicting an 11 to 19 percent drop-off in global passenger revenue this year, driven by falls in airfreight and cargo,” noted The Washington Post.

Taking a more hard-edge estimation, “There is a red line in the calendar,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “The value of it is that this report gives us a kind of a benchmark of where we were before things began to go wrong,” also according to the Times.

Taking a wider look often involves a marker and those 10 year treasuries are giving notice, as “The low yield on the 10-year Treasury is a sign that the investors are very concerned about future growth in the economy,” said Eric Jacobson, a senior research analyst at Morningstar. “That’s what happens. When people are worried about everything else, they run to Treasurys because they know they are going to get paid back.”

On the marquee side, as we label the unemployment rate, all seemed good, but as always, it’s important to take a look at those that want full time jobs, but are stuck in part-time jobs and this figure has wavered little since January.

Labor force participation held steady at 63.4, and reflects an increase, but as reported last month, with high numbers of women working; but, also reflects a trend to support working families, where men are working at lower wages, and their wives are forced to take work, or more work to sustain the family, and just as true for single mothers. 

Women have come a long way since this vintage image

These pink-collar jobs, as they used to be known, are heavily concentrated in hospitality transportation and service industries.

“It’s certainly a relief that we had a strong tailwind,” said Diane Swonk, chief economist at Grant Thornton. “Service, leisure and hospitality, these are all very vulnerable. The good news is that these workers had some cushion ahead of time. It helps blunt the blow,” to the Times.

Wages being central are still a disappointment and even with a strong “firewall” against the coronavirus, as some economists have predicted, all things being equal wages are the central reason why people work, and their expenditures are the driver of the U.S. economy.

The Atlantic noted in late March that "the spiraling cost of living" was bleeding Americans dry and that "for millions, a roaring economy felt precarious or downright terrible" with high housing costs that have "outstripped wages in roughly 80 percent of America's metro regions, " added This Week.

Add the high cost of education and loan repayment many young people cannot afford to move to areas where the better jobs are, not to mention the high cost of child-care, they summarized.

Daniel Zhao, the senior economist at Glassdoor, noted to ABC News, that, “Despite the hot job market, American workers have yet to see wages accelerate," he said. "If things don’t change in the coming months, American workers may not see big wage gains in 2020."

Manufacturing managed to add 15,000 jobs, a feat in that area these days, but the ISM in their report has noted that from January 2020 there has been a 2.2 percent reduction, reflecting an 8 percent difference between 50.1 percent in February and 52 percent from the first month of the year, also reflected in new orders.

The ISM is considered one of the most reliable economic indicators and its report shows cautious optimism as well as some mixed news with employment, and “This is the seventh month of employment contraction, but at a slower rate compared to January,” they said.

 “Among the six big industry sectors, two expanded and four contracted . . .  of the 18 manufacturing industries, three reported employment growth in February: Food, Beverage & Tobacco Products; Plastics & Rubber Products; and Computer & Electronic Products”; but all reflective of the dangers of Covid-19 for the future, as we have seen.

Engineering News-Record, offered some conjoined news, reporting that “Construction’s jobs surge continued for the second-straight month as the industry’s workforce expanded by 42,000 in February, the Bureau of Labor Statistics has reported.

The February numbers, contained in a BLS report released on March 6, follow a construction gain of 49,000 in January, as the bureau adjusted its initial preliminary figure upward by 5,000 for that month, making a stronger gain than expected."

March will be a truer indicator of where the U.S. jobs market is going to go, and the effect of the virus, and that view may not show the optimism of some, and one can only take the long view at this point.

Updated March 9, 2020, 5:52 DCST