Weak Payrolls May Have Issues Ahead Other Than Just Weaker Business Trends

Some reports from the U.S. Department of Labor show stronger than expected monthly payroll gains, while others do not. The case for February was the latter. The U.S. economy reported a mere 20,000 seasonally adjusted gains in nonfarm payrolls.

The very low payrolls gains appear to be due to that inevitable struggle with unemployment so low that it is becoming hard to find workers. Meanwhile, the unemployment rate fell to 3.8% from 4.0% in February.

Consensus estimates from Dow Jones were calling for 3.9% unemployment and 180,000 new jobs to have been created.

Private sector payrolls rose by 25,000 jobs in February after government payrolls declined by 5,000 positions for the month.

An additional consideration is that revised figures showed gains of 311,000 jobs in January and 227,000 in December. All in, that represents a combined 12,000 more than had been previously reported.

One hot area was the year-on-year wage growth coming in at 3.4%. That is nearly a decade high as average hourly earnings rose 11 cents to $27.66 per hour. The Labor Department also showed that the average workweek fell to 34.4 hours in February from 34.5 hours in January.

The unofficial unemployment rate, including discouraged workers and those working part-time for economic reasons, fell to 7.3% in February from a prior report of 8.1%. That drop may have some ties to the ending of the partial government shutdown.

Another broad measure of the economy is the labor force participation rate. This figure was flat in February over January at 63.2%, but it’s still up 0.2 points from a year ago.

The stock market was handily lower on Friday morning, with Dow futures down over 200 points and S&P 500 futures down 23 points. Still, the Dow had risen 3,500 points from its early January lows prior to the recent selling.

Employment in professional and business services added 42,000 jobs, health care added 21,000 and wholesale trade added 11,000 jobs. Construction employment decreased by 31,000 jobs.