US employers maintained a robust pace of hiring in February, giving the economy a strong boost heading into the coronavirus outbreak, which has stoked fears of a recession and prompted an emergency interest rate cut from the Federal Reserve.
The Labour Department's closely watched monthly employment report on Friday also showed solid wage growth and the unemployment rate falling back to near a 50-year low of 3.5%. Employers also increased hours for workers last month.
But the strong report likely does not capture the impact of the coronavirus, which spread in the United States beginning in late February, leaving financial markets and economists to anticipate severe economic disruptions in the months ahead. Financial markets view the virus, which causes a flu-like illness, as the catalyst that could interrupt the longest economic expansion on record, now in its 11th year.
Nonfarm payrolls increased by 273,000 jobs last month as unreasonably mild weather continued to boost hiring in weather-sensitive sectors, matching January's tally, which was the largest gain since May 2018.
While transportation and warehousing payrolls fell by 4,000 jobs in February, suggesting some early impact from the coronavirus, that was erased by strong gains nearly across all sectors, including government. The economy created 85,000 more jobs in December and January than previously reported.
Economists polled by Reuters had forecast payrolls increasing by 175,000 jobs in February. Employment gains averaged 243,000 per month in the last three months. The economy needs to create roughly 100,000 jobs per month to keep up with growth in the working-age population.
The government canvassed business in mid-February, before the country reported deaths from the virus and rising infections starting in the final week of the month.
At least 14 people have died in the United States from the respiratory disease called COVID-19 caused by the coronavirus and more than 200 have been infected. The disease has spread across 20 states. Overall, the fast-spreading disease has killed over 3,000 people and sickened nearly 100,000, mostly in China.
The highly contagious virus has rattled investors, resulting in the Fed on Tuesday slashing its benchmark overnight interest rate by a half percentage point to a target range of 1.00% to 1.25%. It was the US central bank's first emergency rate cut since 2008 at the height of the financial crisis.
Fed Chair Jerome Powell acknowledged the economy's strong fundamentals, but said "the coronavirus poses evolving risks to economic activity." Financial market are expecting further rates cuts at the Fed's March 17-18 policy meeting.
Economists say fiscal stimulus is needed to cushion the economy against the disruptions from the coronavirus, though many are not yet forecasting a recession. Growth estimates for the first half are around 1%. The economy grew 2.3% in 2019.
Average hourly earnings rose 0.3% in February after gaining 0.2% in January. The annual increase in wages, however, slipped to 3.0% in February from 3.1% in January as last year's large gain falls out of the calculation.
The average workweek increased to 34.4 hours after holding at 34.3 hours for three straight months.
The jobless rate fell to 3.5% in February. It increased one-tenth of a percentage point to 3.6% in January as more people joined the labour force, in a sign of confidence in the job market. The labour force participation rate, or the proportion of working-age Americans who have a job or are looking for one was unchanged at 63.4%, the highest since June 2013.
Construction payrolls increased by 42,000 last month after surging 49,000 in January. Manufacturing employment rebounded by 15,000 jobs after falling 20,000 in January. The gains are unlikely sustainable as the coronavirus is fracturing supply chains, and the production of Boeing's troubled 737 MAX jetliner remains suspended.
The drop in transportation and warehousing payrolls last month after increasing by 29,800 jobs in January was likely because of travel restrictions enforced by some authorities to curb the spread of the coronavirus. Traffic at West Coast ports has declined. A report from the Commerce Department on Friday showed the trade deficit dropped 6.7% to $45.3 billion in January as both imports and exports fell. Government payrolls increased by 45,000 in February, boosted by increases in state government education. About 7,000 temporary workers were hired for the decennial census.
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