Weekly Economic Trends and Indicators
The Headlines:
The U.S. economy added 151,000 new jobs in February according to the Bureau of Labor Statistics (BLS). This was lower than expectations. The unemployment rate increased slightly from 4.0% to 4.1%. Average hourly earnings increased by 0.3% in February to $35.93, and the average workweek was unchanged at 34.1 hours.
Job growth estimates were revised downward by a total of 2,000 for December and January combined.
The payroll processing firm ADP estimates that the private sector added 77,000 jobs in February. This was below expectations and slightly more than half of the estimated 140,000 private sector job growth in the BLS survey.
The Details:
While job growth was below expectations, this number is still near the average for the last year. Manufacturing jobs were up slightly, mainly due to a recovery in motor vehicles and parts which were down last month. The largest monthly job gains (52,000) were in the health care sector.
Government employment increased by 11,000 jobs overall, boosted by an increase of 20,000 jobs in local government (roughly split between local government education and other local government jobs). Federal government employment decreased by 10,000. Very little of this change is due to the recent employment reductions coming from the Department of Government Efficiency (DOGE). Most of those reductions came after the reference week for February, and some may take even more time to show up in the data.
The Context:
There has been increased concern about a slowdown in the economy recently, and these job numbers are evidence of a moderate slowing of economic activity. The global outplacement firm Challenger, Gray, and Christmas reported that the number upcoming job cuts announced in February was the largest since July 2020. Also, in the last couple of weeks, the Atlanta Fed’s GDPNow estimate of 1st quarter real GDP growth has fallen into negative territory. However, this estimate of current quarter GDP is often volatile, so most analysts are not placing high confidence in the latest iteration of the estimate. Part of the reason for the drop in the estimate was the increase in the trade deficit. However, the cause of the recent spike in imports may simply be some “pull forward” of imports by businesses in anticipation of future tariffs rather than a sign of economic weakness.
The rise in uncertainty has shifted expectations of further interest rate cuts from the Fed this year. A month ago the predominant expectation was one, possibly two, quarter point cuts. After last week’s economic news, the expectation is for two or three, with a small chance of four cuts this year. While most still expect the Fed to wait until at least June for any further cuts, further softening of the labor market could alter that timing.
Next week: Inflation and consumer sentiment
