The US economy added 273,000 jobs in February, far more than expected, and the unemployment rate returned to a 50-year low in a sign of recent strength as the world’s largest economy eyed the domestic spread of the coronavirus.
The number of jobs added last month matched January’s revised figure, according to data on Friday from the US labour department. It is the fastest rate of job growth since May 2018, and surpassed economists’ forecast for a gain of 175,000.
The unemployment rate eased back to 3.5 per cent, a 50-year low, having ticked up slightly last month. Economists had expected it to remain steady at January’s rate of 3.6 per cent.
Speaking to reporters from the White House, Donald Trump said that people were “shocked” at how good the jobs numbers were. Larry Kudlow, the president’s chief economic adviser, appeared on CNBC to underline the administration’s economic approach to the virus: robust growth will need few interventions.
“I don’t want to panic on the economy, which looks sound,” he said.
But US stocks were not reassured. The S&P 500 sold off for a second straight day, down 2.4 per cent, as stocks around the globe tumbled and government bond prices raced to historic highs.
“It’s one of the best reports that will be the most under-appreciated,” said Gregory Daco, chief US economist at Oxford Economics. “It’s relevant in the sense that the US economy was robust before, but it doesn’t really tell us anything about the future.”
Michelle Meyer, head of US economics at BofA Securities, said that the data indicated that there might be “more cushion in the economy to absorb the shock” if the coronavirus stalled economic growth.
Healthcare, social assistance and food services and bars led job gains last month, according to the US labour department data. Federal government employment was also boosted by the hiring of 7,000 temporary US census workers.
Wage growth picked up to 0.3 per cent in February, the biggest monthly rise since November. Over the medium term, however, last year’s impressive wage growth appears to have flattened out. The annual pace of average earnings growth slowed to 3 per cent, from 3.1 per cent a month earlier.
Expectations the Federal Reserve will cut rates at its regular policy meeting in less than a fortnight, after cutting them by half a percentage point at an emergency meeting on Tuesday, pushed the yield on the benchmark 10-year Treasury below 0.7 per cent for the first time earlier on Friday.
Brian Coulton, chief economist at Fitch Ratings, said another strong jobs report underscored the resilience of the US services sector, “at least until February”.
“The fallout from China’s sharp downturn and the changes in US firms and households’ behaviour in response to the Covid-19 outbreak — including reduced travel — will doubtless take a toll on service sector and broader US economic activity from March. But it comes against the backdrop of steady growth in the non-manufacturing sector and a tight labour market, supporting consumption,” he said.
Mohamed El-Erian, the chief economic adviser at Allianz, said: “The good news — a strong US labour market, especially when it comes to job creation and wage growth. The bad news — when it comes to looking forward, this tells us more about what could have been rather than what will be.”
Additional reporting by Jennifer Ablan in New York
