February was the second-worst month of Donald Trump’s presidency when it came to job creation, but economists say extreme weather events may bear much of the blame for presenting the misleading picture of an economy that’s in trouble.
In February, the construction sector lost 31,000 workers, and the retail shrank by 6,100 jobs amid record-low temperatures in the U.S. Midwest and on the Pacific Coast. Employment in the leisure and travel industry, which added 154,000 jobs in December and January, was unchanged in February.
All three sectors “are much more sensitive to weather” than other industries, Joseph Song, an economist with Charlotte, N.C.-based Bank of America, told the Washington Examiner. Several other economists agreed that weather had an effect on jobs in February.
One “factor in the slowdown was likely adverse weather,” said Barclays’ Gapen, who blamed it for the slowdown in construction.
Weather-related drops in employment have been seen before, including in September 2017, when U.S. payrolls saw a net loss of 33,000. Then, tropical storms that flooded much of Houston, Texas, and lashed Florida’s coast led to tens of thousand of lost jobs in restaurants and bars.
While the 20,000 job gain in February fell short of expectations, the unemployment rate fell to 3.8 percent and hourly wages rose 3.4 percent, which suggests that overall, “the labor market continues to heat up,” Song said.
“Obviously, 20,000 is not the trend,” Song said, although he noted that the 311,000 job gain seen in January was probably above trend.
The February total was so wildly out of sync with economic forecasts and the performance of previous months that “you have to think twice about whether you want to read too much” into it,” Wayne Wicker, who oversees oversees $28.8 billion in retirement plans for Washington-based ICMA-RC, told the Washington Examiner. “I certainly wouldn’t be jumping to the conclusion that this is indication economic activity is taking a dramatic turn.”
Nonetheless, U.S. job growth is unlikely to keep up with the average of 223,000 new positions a month last year, when employers were reaping the initial benefits of a GOP-led tax bill that cut the top corporate rate to 21 percent from 35 percent. Data gathered by Bankrate.com suggests average gains of 166,000 a month in the next year, in keeping with the average of 165,500 for the first two months of 2019.
“Employment growth should be decelerating, but we think the February data overstate the degree to which it likely is,” said Michael Gapen, an economist with British lender Barclays Plc.
Bankrate.com’s forecast suggests the U.S. economy is in no danger of overheating and that the Federal Reserve can continue to wait before raising short-term interests rates beyond the current range of 2.25 to 2.5 percent, said Mark Hamrick, senior economic analyst for the company. The Fed’s four increases last year prompted pushback from President Trump, who said they were hurting record economic growth that he had campaigned on delivering.
The central bank has indicated that rate increases are on hold for now, and the economy would be lucky to see, by mid-year, numbers that would support a hike in the last half of 2019, Doug Clark, chief portfolio strategist at Prime Advisors, told the Washington Examiner. Prime Advisors, which invests in bonds and other fixed-income securities, manages $17.7 billion in assets.
