Disappointing U.S. payrolls suggest dawn of a slowdown

The U.S. labour market may not be as weak as February’s payrolls number suggested, but the report provides a reality check that a long-forecast slowdown is arriving.

Employers added 20,000 jobs during the month, the fewest since September 2017, missing all economist estimates and bucking a recent trend of strong February readings.

Analysts said the unexpectedly low figure doesn’t mean conditions rapidly deteriorated — citing weather effects and payback from outsized gains in prior months — but they pointed to the likelihood of a moderation in job gains this year as economic growth cools.

“I don’t think you want to say that 20,000 is the new trend, but the trend probably is shifting down,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. “It’s hard to know with precision how much of a downshift there will be. We’ll see job growth better than this, but not as good as we saw last year.”

U.S. stocks dropped along with the dollar, with the Standard & Poor’s 500 Index falling for a fifth day, while benchmark Treasury yields were steady as markets weighed the jobs report with the risk of greater inflation pressures.

While the payroll gains disappointed, the report’s other highlights were largely positive: The unemployment rate declined by more than forecast and hourly wages rose from a year earlier at the fastest pace since 2009, figures that bode well for consumer spending. Some industries hit hard in February are typically closely tied to weather patterns, including construction and retail, while the lingering effects of the partial government shutdown may have created some volatility.

“There was always going to be noise in this as a result of the shutdown,” Constance Hunter, chief economist at KPMG, said on Bloomberg Television.

Policy-makers and economists are likely to wait for several months of weak hiring before concluding there’s cause for concern in the labour market.

“The fact that hiring was weak, but the unemployment rate declined and jobless claims have not materially increased, signals that labour market conditions are not materially deteriorating,” Bloomberg economists Carl Riccadonna, Yelena Shulyatyeva and Tim Mahedy say.