WASHINGTON (Reuters) – U.S. employment growth almost stalled in February, with the economy creating only 20,000 jobs, adding to signs of a sharp slowdown in economic activity in the first quarter.
The meager payroll gains reported by the Labor Department on Friday were the weakest since September 2017, with a big drop in the weather-sensitive construction industry.
They also reflected a decline in hiring by retailers and utility companies as well as the transportation and warehousing sector, which is experiencing a shortage of drivers.
The sharp step-down in payrolls was another blow to President Donald Trump who has suffered a series of setbacks in recent weeks, including failed nuclear talks with North Korea, a record goods trade deficit despite his administration’s “America First” policies and the economy missing the White House’s 3 percent annual growth target in 2018.
But the stumble in job growth, which followed two straight months of hefty gains, likely understates the health of the labor market as other details of the closely watched employment report were strong.
The unemployment rate fell back to below 4 percent and a wider measure of underemployment fell by the most ever. In addition, annual wage growth was the best since 2009, and the economy created 12,000 more jobs in December and January than previously reported, bringing the total for the two months to 538,000.
“We had warned that recent employment gains had overstated the underlying strength of the U.S. labor market,” said Harm Bandholz, chief U.S. economist at UniCredit Research in New York. “And the correction now came in February with a bang, rather than spread out over various months.”
Federal Reserve Chairman Jerome Powell made no mention of the latest numbers in remarks delivered more than 12 hours later, noting simply that most measures of the labor market “look as favorable as they have in many decades” and adding that there is “nothing in the outlook demanding an immediate policy response.”
But the mixed report was another indication the economy, which in July is set to mark a record 10 years of expansion, is slowing as the stimulus from a $1.5 trillion tax cut and increased government spending ebbs.