Coronavirus spread could halt robust U.S. Job gains

Economists largely dismissed February’s hiring growth as a less important economic indicator than usual.

By guest author Sarah Chaney from Wall Street Journal

Caption courtesy by Wall Street Journal

The spread of the novel coronavirus threatens to trigger a sharp pullback in U.S. hiring after the labor market showed signs of picking up earlier this year.

Services industries that help drive the U.S. economy—including air transportation, restaurants, entertainment and retail—would suffer the most from the spread of the virus, according to economic research firm Capital Economics.

Some of those sectors saw particularly strong job gains in February before cases of the infection began rising in the U.S., according to Friday’s jobs report from the Labour Department. Leisure-and-hospitality companies added 51000 jobs in February, and restaurants added 53000 to payrolls.

“This forward momentum could help these industries weather this shock, but also raises the possibility that job growth may slow significantly if the impact of the virus hits these industries hard,” said Nick Bunker, economist at job site Indeed.

Economists largely dismissed February’s robust monthly job gain of 273000 as a less important economic indicator than usual. Most companies reported February employee head-counts before concerns escalated that the epidemic would hit U.S. economic growth.

The extent of likely economic harm from the epidemic is not yet known, with damage largely contingent on how long it lasts and how widely it spreads.

The U.S. economy gained an average of 243000 jobs a month from December through February, up from average monthly job growth of 178000 in 2019.

The March employment report will test the endurance of the labour market, the major channel through which the virus could slow the U.S. economy. Fewer job opportunities for workers could dampen consumer spending, the economy’s main engine and—at least until this point—its chief reservoir of strength.

Some companies have expressed concern in recent days about the business impact of the virus and the global economic slowdown. United Airlines Holdings Inc. announced a hiring freeze through the end of June as the spread of the virus depressed bookings. Hyatt Hotels Corp. also froze hiring at some properties as the growing coronavirus outbreak reduces demand for travel.

While virus-related uncertainty could lead employers to hold back on adding workers in future months, many employers are reluctant to cut workers. Jobless claims, a proxy for company layoffs, declined to 216000 last week, a historically low level.

“The decision not to commence layoffs makes perfect sense given how difficult it has been in recent years to find qualified workers,” said Bernard Baumohl, chief global economist at The Economic Outlook Group, in a note.

Microsoft Corp. said it would continue to pay its hourly workers, including those in its large West Coast campuses who staff its cafes and drive its shuttles, despite “reduced service needs.”

The jobless rate has clocked in at either 3.5 % or 3.6 % for the past six months, marking the lowest level of joblessness since 1969.

Gigi Schweikert, president of child-care franchise Lightbridge Academy, said the virus is not impeding hiring plans. The 1600-employee company is looking to add nearly 400 teachers and directors this year as franchises expand near growing populations of dual-income earners.

“It’s still extremely difficult to hire,” she said. “With the unemployment rate as low as it is, there are fewer candidates who are available for the positions.”

Dozens of job openings have popped up in health-care and science roles, as some companies add coronavirus-specific positions, according to an analysis by job-posting site Glassdoor. Among them are a posting for a microbiologist to assist with coronavirus testing in Austin, Texas, and another for registered nurses to conduct coronavirus screenings in Fairfield, Calif.

The impact of the virus on economic data has been muted so far, but most private-sector and government economic surveys were conducted before concerns of the infection’s potential economic effect rose in late February.

One area that could suffer is worker pay. Wages were up 3.0% in February from a year earlier, remaining within the narrow range of the past year and a half, but still a solid pace considering inflation is low.

Kate Bischoff, a Minnesota employment lawyer, said some of her clients in technology and professional services are rethinking the wage increases they had budgeted for 2020, wondering whether they can afford to offer raises if coronavirus wreaks havoc on the economy.

“Should we be preparing for a recession?” she said they are asking. “Should we be raising salaries at this point in time?”

Here is the official record of the U.S. Department of Labour:

Total nonfarm payroll employment rose by 273000 in February, and the unemployment rate was little changed at 3.5 %, the U.S. Bureau of Labour Statistics reported today. Notable job gains occurred in health care and social assistance, food services and drinking places, government, construction, professional and technical services, and financial activities.

This news release presents statistics from two monthly surveys. The household survey measures labour force status, including unemployment, by demographic characteristics. The establishment survey measures nonfarm employment, hours, and earnings by industry. For more information about the concepts and statistical methodology used in these two surveys, see the Technical Note.

Household Survey Data

Both the unemployment rate, at 3.5 %, and the number of unemployed persons, at 5.8 million, changed little in February. The unemployment rate has been either 3.5 % or 3.6 % for the past 6 months.

Among the major worker groups, the unemployment rate for Asians declined to 2.5 % in February. The rates for adult men (3.3 percent), adult women (3.1 %), teenagers (11.0 %), Whites (3.1 %), Blacks (5.8 %), and Hispanics (4.4 %) showed little or no change over the month.

The number of long-term unemployed (those jobless for 27 weeks or more), at 1.1 million, changed little in February and accounted for 19.2 % of the unemployed.

The labour force participation rate remained at 63.4 % in February. The employment-population ratio, at 61.1 %, changed little over the month but was up by 0.4 percentage point over the year. The number of persons employed part time for economic reasons, at 4.3 million, changed little in February. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs.

In February, 1.4 million persons were marginally attached to the labour force, little changed from the previous month. These individuals were not in the labour force, wanted and were available for work, and had looked for a job sometime in the prior 12 months but had not looked for work in the 4 weeks prior to the survey. Discouraged workers, a subset of the marginally attached who believed that no jobs were available for them, numbered 405000 in February, little different from the previous month.

Establishment Survey Data

Total nonfarm payroll employment rose by 273000 in February, after an increase of the same magnitude in January. In 2019, job growth averaged 178000 per month. In February, notable job gains occurred in health care and social assistance, food services and drinking places, government, construction, professional and technical services, and financial activities.

Employment in health care and social assistance increased by 57000 in February. Health care added 32000 jobs, with gains in offices of physicians (+10000), home health care services (+10000), and hospitals (+8000). Employment in social assistance increased by 25000, with a majority of the gain in individual and family services (+18000). Over the past 12 months, employment increased by 368000 in health care and by 191000 in social assistance.

Food services and drinking places added 53000 jobs in February. Employment in the industry has increased by 252000 over the past 7 months, following a lull in job growth earlier in 2019.

In February, government employment increased by 45000, led by a gain in state government education (+16000). Federal employment increased by 8000, reflecting the hiring of 7000 temporary workers for the 2020 Census.

Construction added 42000 jobs in February, following a similar gain in January (+49000). In 2019, job gains averaged 13000 per month. In February, employment gains occurred in specialty trade contractors (+26000) and residential building (+10000).

In February, employment in professional and technical services increased by 32000. Job growth occurred in architectural and engineering services (+10000) and in scientific research and development services (+5000). Employment continued to trend up in computer systems design and related services (+8000). Over the past 12 months, professional and technical services has added 285000 jobs.

Employment in financial activities increased by 26000 in February, with gains in real estate (+8000) and in credit intermediation and related activities (+6000). Over the past 12 months, financial activities has added 160000 jobs.

Employment in other major industries, including mining, manufacturing, wholesale trade, retail trade, transportation and warehousing, and information, changed little over the month.

In February, average hourly earnings for all employees on private nonfarm payrolls increased by 9 U.S. Cents to USD 28.52. Over the past 12 months, average hourly earnings have increased by 3.0 %.

Average hourly earnings of private-sector production and nonsupervisory employees increased by 8 cents to USD 23.96 in February.

The average workweek for all employees on private nonfarm payrolls rose by 0.1 hour to 34.4 hours in February. In manufacturing, the workweek increased by 0.2 hour to 40.7 hours, and overtime edged up by 0.1 hour to 3.2 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls increased by 0.1 hour to 33.7 hours.

The change in total nonfarm payroll employment for December was revised up by 37000 from +147000 to +184000, and the change for January was revised up by 48000 from +225000 to +273000. With these revisions, employment gains in December and January combined were 85000 higher than previously reported. (Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.) After revisions, job gains have averaged 243000 per month over the last 3 months.