U.S. employment report should show strength before coronavirus spreads

WASHINGTON (Reuters) – Employment growth in the United States likely slowed in February, but pace likely remained consistent with a healthy job market despite the coronavirus epidemic, which fueled fears financial markets from a recession and promptly lowered interest rates from the Federal Reserve.

Although the Labor Department's monthly employment report, which is closely monitored on Friday, will not fully capture the impact of the coronavirus, which spread to the United States in late February, nothing So far, it indicates that the epidemic has affected the job market. Layoffs remain weak and small businesses and service industries continue to hire at a solid pace.

On Tuesday, the Fed lowered its overnight overnight rate by half a percentage point to reach a target range of 1.00% to 1.25%, when rates were cut for the first time. emergency of the American central bank since 2008 at the height of the financial crisis.

Fed Chairman Jerome Powell acknowledged the solid fundamentals of the economy, but said that "coronavirus poses evolving risks to economic activity".

"The job market is the firewall of the economy," said Ryan Sweet, senior economist at Moody’s Analytics in West Chester, Pennsylvania. "If we are to overcome this and avoid a recession, the job market cannot show any significant cracks. So far, the signs are encouraging."

According to a survey by economists at Reuters, the government establishment survey will likely show that the non-farm payroll increased by 175,000 jobs in February. Although this is a decline from the 225,000 jobs added in January, the expected gains would correspond to the average monthly employment growth in 2019.

The economy needs to create around 100,000 jobs per month to keep up with the growth of the working age population. Employment growth in January was spurred by unusually mild weather, which spurred hiring in the construction, recreation and hospitality industries. Temperatures were less warm in February.

The government investigated the cases in mid-February. In the United States, at least 11 people have died from a respiratory disease called COVID-19 caused by the coronavirus and more than 100 have been infected. Deaths and increased infections were recorded from the last week of February. Overall, the rapidly spreading disease has killed more than 3,000 people and made nearly 100,000 sick, mainly in China.

The transportation payroll may show some impact from the coronavirus in February due to travel restrictions that have been imposed by some authorities to curb the spread of the disease. A reduction in employment in ports is also likely amid reports of a decline in the volume of shipping containers.

This could however be offset by an increase in government hires for the 2020 census.

Economists say employers are more likely to cut workers' hours at first and lay off workers if the epidemic persists beyond the second half of this year and into 2021 So far, weekly demands for unemployment benefits, the most timely labor market indicator, have tended to be weak. early March.

On Thursday, international outplacement firm Challenger, Gray & Christmas reported a sharp drop in layoffs announced by U.S.-based companies in February and said the coronavirus epidemic "hadn't not yet pushed companies to cut jobs. "

SLOWER JOB GROWTH

Still, the virus, which causes a flu-like illness, is expected to slow job growth over the next few months.

"We expect the impact on employment in the coming months to be modest and focused on service sectors such as recreation and hospitality and air transportation," said Veronica Clark , economist at Citigroup in New York. "There could also be weaker job creation in the manufacturing sector if supply chain problems or weaker external demand cause the sector to slow down."

The highly contagious virus has rocked investors, who have continued to sell risky assets such as stocks despite lower Fed rates, in favor of US government safe haven bonds. The 10-year US Treasury yield fell below 1%. Economists believe fiscal stimulus is necessary to protect the economy from the disruption caused by the coronavirus.

"Fears of a recession are a bit premature, much of the economy is strong enough to absorb the first wave of success," said Joe Brusuelas, chief economist at RSM US in New York.

"What is going to be critical is how quickly the political reaction function comes into play. The Fed is not well positioned to deal with it and the financial markets are realizing that this is a real economic problem that requires budgetary attention and the White House simply does not intervene. the plate at this stage. "

The strength of the labor market should be strengthened by steady wage growth. Average hourly wages are expected to increase 0.3% in February after increasing 0.2% in January. The annual wage increase, however, will slide to 3.0% in February, from 3.1% in January, the significant gain of last year not being part of the calculation.

The unemployment rate should stay at 3.6% in February. It increased by a tenth of a percentage point in January, as more and more people joined the workforce, as a sign of confidence in the labor market.

Payroll growth in construction is expected to have slowed in February after the industry added 44,000 jobs in January, the largest in a year. Further job losses in the manufacturing sector are expected after the sector lost 12,000 jobs in January.

Manufacturing faced problems ranging from the US-China trade war to that of Boeing (TO PROHIBIT) suspension in January of production of its struggling 737 MAX airliner.

The government payroll is expected to have increased by 15,000 in February. According to Census Bureau data, 20,209 temporary workers hired for the decennial population count received wages during Non-Farm Wage Survey Week.