After months and months of continuous growth, we woke up to a bit of a surprise last week when the U.S. Department of Labor reported February 2019 was the worst month for jobs since September 2017. According to estimates from the Labor Department, non-farm payroll increased by 20,000. Economists from Dow Jones expected an increase of about 180,000 — and that was considered to be a modest estimate.
On the flip side, the unemployment rate fell to 3.8 percent, down 0.2 percentage points from the 4 percent it was at in January.
But the flat job market profile isn’t any reason to panic — at least if you ask the director of the National Economic Council, Larry Kudlow. He’s the White House’s top economic advisor, and he told CNBC after the report was released basically to not pay any attention to it. We’ll take a look at why in this post.
The “Fluke” Job Report
So, why is the White House’s top economic advisor dismissing the February job report?
At first glance, you might just think he’s trying to downplay the significance of it as part of his role in Washington D.C. In fact, he called the report “fluky.” But Kudlow has a point, especially when you first consider that this report at least partially included the recent U.S. government shutdown. Kudlow is dismissing the report because of timing issues.
Reports indicate, more specifically, an increase of 198,000 individuals who don’t consider themselves in the labor force. The unemployed fell by about 300,000. And those who do consider themselves employed fell by about 45,000.
While it may not be the favorable numbers that the government was hoping for, it’s important to consider two factors: One, there’s the aforementioned government shutdown, which surely played a role in it. Two, there’s the fact that economists — both Kudlow and others — believe the U.S. is still on track for 3 percent growth overall this year. In other words, this surprising February report looks more like a glitch and doesn’t help change the current trajectory that the U.S. is on from an economic perspective.
Some Good Things in a “Fluky” Report
Despite the unfavorable February job report, there are a few significant positives that should be highlighted. The first is Hispanic unemployment, as the jobless rate among this demographic declined to 4.3 percent from January’s 4.9 percent. For Caucasians, the rate dipped from 3.5 percent in January to 3.2 percent in February. Like we told you earlier, unemployment overall decreased by 0.2 percentage points. The other big news is that hourly pay rate increased. The report says that this increase was 3.4 percent, year-over-year, which marks the best number since economic recovery began following the recession from about a decade ago. It’s proof that workers are earning more, and that’s a very good thing.
Major increases occurred in the professional and business services sector, which saw a 42,000 uptick in positions. Furthermore, the health care industry added more than 20,000 jobs and about an 11,000 job increase was seen in the wholesale trade field. On the downside, construction jobs decreased by more than 30,000, government jobs by 5,000 and the hospitality industry was flat. Though considering the shutdown, perhaps decreases in the aforementioned categories weren’t all that surprising.
All in all, there’s no reason to panic. The economy is still kicking, unemployment is continuing to go down and hourly wages are continuing to trend upwards. And while the February jobs report may have been unfavorable, there’s no reason to think that economic growth is tailing off. In fact, if you listen to Larry Kudlow, we’ll all be able to breathe a sigh of relief when the March jobs report is released, as we’ll be tuned in to just how much of a “fluke” the February one was.