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Pre COVID-19 Momentum Boosts February Jobs

RFP
Payroll employment surged another 273,000 in February, matching upward revisions to the January data. The monthly gains in January and February represented the strongest back-to-back gains since May 2018. Gains were driven by continued strength in the health care sector and a pickup in momentum in the leisure and hospitality sectors. The latter is welcome news because it will help workers most vulnerable to layoffs tied to COVID-19: those related to travel and conferences. The strong February numbers will be a cushion to blunt the blow of the virus when it hits their paychecks. Layoffs in the travel and tourism industry started to pick up at the end of February and beginning of March but will not show up as losses in the payroll data until the March jobs report.

Unusually mild winter weather continued to boost construction jobs, with more than 90,000 new jobs showing up during the two months. The surge in construction also showed up as a large gain in architects and engineers for the month. Public sector hiring surged on robust hiring for education at the state and local levels, while hiring for the 2020 Census helped buoy the number of federal jobs.

Manufacturing and mining remained tepid, while retail and transportation jobs contracted. Retail losses reflected the ongoing restructuring at traditional retailers. Store closures have increased since the start of the year. The weakness in transportation is more insidious as it is a precursor of what’s to come in response to supply chain disruptions associated with COVID-19. Imports from China plummeted in February and early March, which took a toll on some of our largest ports. Long Beach in California was hit particularly hard with up to 50% of longshoremen laid off by the end of February. That could show up in the revisions next month. The ripple effects are starting to be felt in the rail and heavy trucking sectors. Courier and messenger jobs also fell during the month as firms started to pull back.

Average hourly earnings rose 0.3% during the month, but the year-on-year gain slowed to a 3% pace. A surge in wage growth one year ago is hurting year-on-year comparisons. February of 2019 marked a peak in the acceleration of wage growth for this expansion. The gains were stronger for nonsupervisory workers as minimum wages offered by employers continued to rise in some sectors. Wells Fargo joined other major banks and lifted its minimum wage from $15 per hour to $20 per hour in March, depending on their location. Hours worked edged up slightly in February from January. This is an area that will be hit hard by COVID-19 in March as hourly personnel are laid off.

Separately, the unemployment rate edged back down to 3.5%, while the participation rate held at the high for the cycle hit in January. The household survey showed much slower employment growth over the first two months of the year than the establishment survey cited above.

Bottom Line
The labor market held up extremely well at the start of the year with an extra boost from unseasonably mild winter weather. That resilience will help blunt the blow from COVID-19, especially as layoffs in the service sector mount. One of the largest concerns is the lack of paid sick-leave for food service workers, who could increase the risks of contamination as they can’t afford to stay home when they are sick. This is an area that fiscal policy could play a role to slow the impact of the virus on the economy, long-term.

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