What to expect in the February US jobs report out Friday

07 MAR 19 08:09 ET

By Lydia DePillis, CNN Business

(CNN) — It’s looking like the US economy turned in another respectable month of job growth in February, even as a broader slowdown looms.

The Labor Department turns in numbers for last month on Friday, and economists polled by Refinitiv forecast on average that employers added another 185,000 jobs, while the unemployment rate ticked down to 3.9%.

That would be the lowest number since last September — and possibly the beginning of a long-expected moderation in the pace of growth.

Even as large segments of the economy have started to turn sour in recent months, the labor market doesn’t seem to have gotten the message. Despite a drop-off in home sales, business investment, and consumer spending, employers have continued to add an average of 234,000 jobs every month over the past year. Higher wages have drawn people who may not have worked since losing a job in the Great Recession back into the workforce.

Refinitiv’s economists think hourly earnings rose 3.3% in January. That’s in line with wage growth over the last several months of 2018, which turned in the fastest pace of growth since the Great Recession.

Preliminary indicators of the health of the labor market have been mixed. The payroll company ADP, which uses a different methodology from the Labor Department to estimate employment gains each month, says businesses added 183,000 jobs in February.

The Federal Reserve’s Beige Book, an anecdotal survey of business conditions that was released Wednesday, said that companies are still having a hard time filling positions, especially in fields like information technology and construction. Paychecks are growing particularly quickly in typically low-wage industries, like food service and retail.

At the same time, the outplacement firm Challenger, Gray & Christmas reported that employers had announced 76,835 job cuts during the month, the highest number since July of 2015. Those are primarily due to cutbacks by the US military as well as low gas prices, which have led to layoffs in the energy sector. However, retailers and automakers have led staffing reductions over the past year.

Still, the slowdown may not be hitting as quickly as originally feared.

Over the past month, some risks that may have prevented employers from expanding have eased.

The federal government shutdown ended in late January, and although the cap on government borrowing went back into effect on March 1, lawmakers still have about six months to figure out a deal to lift it. The Federal Reserve signaled it would be “patient” about raising interest rates, likely forestalling major hikes until later in the year. And President Donald Trump backed off his threat to jack up tariffs on Chinese goods, easing trepidation about rising costs.

“On the margins, it was a small drag,” Luke Tilley, chief economist at the investment manager Wilmington Trust, of trade policy. “But it was really the threat of escalation, that’s the real fear.”

Meanwhile, manufacturing has been bogged down around the world by falling demand in China, which is confronting an economic malaise caused in part by American tariffs, among other factors. The United States has been no exception: IHS Markit’s Purchasing Managers Index, a survey that asks manufacturers whether their business is growing or shrinking, fell to its lowest level since August of 2017 and capital expenditures in particular falling off last year’s highs.

“We don’t think it’s a blip,” Tilley says. “But we are not concerned about it because we think that it falls in line with the deceleration that we had been expecting all along.”