US Employers Slam Brakes On Hiring, Add Just 20,000 Jobs in February
US employers added just 20,000 jobs in February, a sharp pullback after a quarter of solid gains averaging 186,000 new jobs a month, the Labor Department reported Friday.
The scarcity of new jobs added to the economy is the smallest monthly gain in nearly 18 months, and comes on the heels of a January in which employers added a robust 311,000 jobs.
“This is a shockingly bad number,” said Austan Goolsbee, the former chair of the Council of Economic Advisors under President Barack Obama. “Let’s hope it is a blip resulting from the government shutdown or something else.”
Friday’s report is the latest sign that growth is slowing due to a weakening European economy, uncertainties over Brexit and concerns over unresolved trade friction between the United States and China.
But it’s difficult to get a read on exactly what’s happening in the US economy due to a delay in the release of several key reports caused by the partial shutdown of the federal government, which ended Jan. 25.
Last week, the Commerce Department reported that the nation’s gross domestic product rose 2.6 percent in the final quarter of 2018, a slowdown from the growth rate of 4.2 percent in the third quarter.
Economists attributed the deceleration to weaker consumer spending, the growth of which slowed from 3.5 percent in the third quarter to 2.8 percent in the fourth quarter.
Consumer spending is a closely watched economic indicator because it accounts for about 70 percent of the nation’s economic activity.
There’s now ample evidence that consumers were feeling jittery as 2018 came to a close. On Thursday the Federal Reserve reported the net worth of America’s households fell by a record $3.8 trillion during the fourth quarter, pulled down by sharp declines on Wall Street that briefly pushed the market into bear territory.
And last month, The Conference Board, the non-profit business membership and research group organization reported a fall off in consumer confidence extended into January.
In response, U.S. businesses began the year cutting orders for equipment and machinery, and, as is now apparent from Friday’s Commerce Department report, scaled back hiring, over concerns about demand for their products.
Stocks fell on Friday morning as word spread that February was the weakest month of job creation since September 2017.
However, there is still room for guarded optimism about a possible uptick in economic growth and job creation in the second quarter of the year.
For instance, The Conference Board saw an increase in its Consumer Confidence Index in February, rising to 131.4 compared to 121.7 a month earlier.
Further, its Expectation Index, a measure based on consumers’ short-term outlook for income, business and labor market conditions – increased from 89.4 in January to 103.4 in February.
The board’s next analysis of its index is scheduled to be released on March 26.
In the meantime, the Federal Reserve also sees signs that consumers are shaking off the doldrums of late 2018.
On Thursday it said consumer borrowing rose in January as credit card expenditures rebounded after a December slowdown.
Like the broader measure of consumer spending, consumer borrowing is closely watched as a measure of household confidence about the future.
According to the Federal Reserve, borrowing increased by $17.05 billion in January after a gain of $15.36 billion in December.
Of that total, borrowing on credit cards was up $2.57 billion after a gain of just $939 million in December.
In addition borrowing for student loans and vehicle purchases was also stronger in January, climbing $14.47 billion in January after an increase of $14.42 billion in December.
The increases pushed overall consumer borrowing to a record $4.03 trillion, compared to $3.84 trillion in January 2018, and that suggests to economists that consumers remain confident about their employment prospects and future income growth.
Speaking of which, the Commerce Department also reported the nation’s unemployment rate fell to 3.8 percent in February from 4 percent a month earlier. It also said employers are continuing to compete for workers, driving up average hourly pay 3.4 percent from a year earlier.
Goolsbee, who is currently the Robert P. Gwinn Professor of Economics at the University of Chicago’s Booth School of Business, said when it comes to the political implications of Friday’s jobs report, it’s important to keep things in perspective.
“There is frequently a lot of noise in jobs numbers month to month,” he said. “If we get numbers like this for a few months in a row, however, it would be a strong indicator of recession.
Anyone that has followed politics for the last 50 years in America knows that recessions are not good for reelection chances for the incumbent,” Goolsbee added.
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