EconoFACTS

March 06, 2020 | 09:09

U.S. Nonfarm Payrolls (Feb. 2020) — Healthy Patient Pre-Virus

Economist

Director and Senior Economist
Economics

Sal Guatieri is a Senior Economist and Director at BMO Capital Markets, with over two decades experience as a ma... (Read more)

Sal Guatieri

Director and Senior Economist
Economics

Sal Guatieri is a Senior Economist and Director at BMO Capital Markets, with over two decades experience as a ma... (Read more)

The U.S. labour market was strong before the coronavirus outbreak, which at least suggests the economy is in good shape to rebound once it emerges from the hospital. We just don't know when that will be, or how bad things will get before then.

Nonfarm payrolls topped expectations by rising 273,000 in February and the prior two months' gains were revised up a total of 85,000. This raised the six-month average to 231,000, the highest since the second half of 2015. Private sector jobs rose 228,000, lifting the six-month trend to 208,000, the best since mid-2018. So, the pace of hiring was actually rising early this year despite worsening labour shortages. That speaks to the fundamental health of the U.S. economy, in general, and consumers, in particular, before COVID-19.

Areas of strength in February included construction, business services and education. Manufacturers added 15,000 jobs, likely in anticipation of the boost from the Phase One trade deal (now delayed). Leisure and hospitality services added 51,000 jobs, though this sector will get hammered in March.

The jobless rate edged back to a 50-year low of 3.5%. However, the "all in" U6 rate edged higher for a second straight month, suggesting a little more slack in the labour market. Accordingly, wage growth remained moderate, with average hourly earnings up 0.3% and the yearly rate easing a tenth to 3.0%.

Aggregate work hours popped 0.5%, the most in two years, which will support Q1 GDP growth. Still, given the expected plunge in business activity in March, growth will do well to top 1% annualized, so we'll stick with our call of 0.9%. And, we expect a moderate decline in Q2 GDP.

The strong jobs report will have little sway with the Fed. Policymakers are in emergency mode to deal with the COVID-19 crisis. They won't hold back at the March 18 meeting if the daily number of new cases outside of China continues to rise and as the economic toll from the virus mounts.

Table 1 - United States — Employment

(change in thousands)

Source: BMO Economics, Haver Analytics