The United States' strong run of uninterrupted jobs growth came to a near halt in February, but wage growth held steady, offering evidence that the labour market remains resilient even as the wider economy is showing signs of slowdown.
Non-farm payrolls rose 20,000, the weakest gain in 17 months, according to the US department of labour. The figure badly missed the median forecast of 180,000 and marks a sharp comedown from the blockbuster 311,000 jobs added in January.
However, it was offset by year-on-year wage growth, which at 3.4 per cent was the quickest pace since April 2009. Unemployment dipped to 3.8 per cent from 4 per cent.
The figures are unlikely to deter the US Federal Reserve from sticking to its newly adopted dovish stance on future rate rise as it waits and sees how slowing global growth will affect the domestic economy this year. Plans for a new round of bank stimulus revealed by the European Central Bank this week to combat a gloomier outlook for the bloc, and a slowdown that will probably see the Bank of Canada eschew future interest rate rises have only added to the cloudier picture outside the US.
Interest rates
After spending much of the past two years unwinding crisis-era stimulus policies, the US central bank held interest rates steady in January and surprised the market with its pledge to be patient toward further rate rises this year.
In recent weeks, a growing number of Fed officials – including Eric Rosengren, one of the bank's more hawkish members – have backed the idea of a pause in the bank's rate cycle, citing growing headwinds from slowing global growth, still tame inflation readings and the rebound in the financial markets.
Data out over the past month have added to the view US economic growth may be cooling. Both industrial production and retail sales surprised on the downside in January and in December respectively. The housing sector meanwhile had a lacklustre end to 2018, with housing starts falling to their lowest level in more than two years in December while home price growth decelerated.
“There is some concern in the market that the labour market is more of a lagging indicator, and has not yet caught up to the darker picture being painted by the rest of the economy in recent releases,” said analysts at MUFG ahead of the report.
In a sign of the economic uncertainty, Goldman Sachs said this week its rolling forecast for first-quarter US economic gross domestic product was pointing to growth at an annualised rate of just 0.9 per cent. A separate “tracking estimate” from the Atlanta Fed forecasts growth at a rate of 0.3 per cent.
US stock futures and the dollar declined after the report. S&P 500 futures were down 0.6 per cent. The DXY dollar index extended a 0.2 per cent decline to trade 0.3 per cent lower at 97.369. Yield on the 10-year Treasury eased 0.9 basis points to 2.6285 per cent. It had been largely unchanged earlier this morning. – Copyright The Financial Times Limited 2019
