US labour market: weather conditions put a temporary freeze only on jobs growth; wages continues to rise slightly

As we can see from the official labour market report, US labour market statistics can expect a meagre figure of only 20,000 new jobs added in February. The number of new jobs created by service providers rose by just over 60,000, the weakest development since September 2017. Employment in the industrial sector even fell by 32,000 jobs. This is the first decline since President Trump took office. Nonetheless, we view the fear that employment growth will come to an abrupt end as exaggerated for a variety of reasons.

On the one hand, the latest employment figures for the previous two months were revised upwards, so that more than half a million new jobs were created in total in December and January alone. On the other hand, a weather-related one-off effect and the good economic climate must also be mentioned, as well as the ongoing fall in unemployment. Even so, this year’s economic engine and hence the driver of jobs are unlikely to be as buoyant as they were last year.

The results of the February survey carried out by the Institute for Supply Management (ISM) are still well above the growth threshold. In fact, sentiment among the services entities, where the vast majority of the new jobs are generally created, has improved even more from an already high level. One reason given was an increase in new orders. A solid surge in employment can therefore be expected, especially this month and in the months ahead. The leisure and hospitality industry should experience catch-up effects after the impact of the historic cold-snap.

Even the sentiment in the industrial enterprises is pointing towards rising employment figures again. We are not quite so optimistic here, however, as the order situation in the manufacturing industry has fallen somewhat in recent months and uncertainty still prevails about the trade disputes with China. Additionally, employment in the oil industry has probably reached its peak. Conversely, we are likely to see a marked spring surge in the very weather-dependent construction industry, where sentiment has improved again noticeably after the downturn in sentiment in autumn.

The decline in unemployment, which is determined in a separate telephone survey, also speaks in favour of a solid employment outlook. The unemployment rate was only 3.8% in February, following a figure of 4.1% for the same month of the previous year. In view of the growing squeeze on qualified workers, the 0.4% month-on-month increase in wages comes as no great surprise. The year-on-year increase was therefore 3.5 percent. However, this is still “only” a moderate increase compared with earlier, prolonged booms on the labour market.

 

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