The February jobs report showed that the U.S. added 273,000 jobs which were well above consensus expectations of 170,000. Employment in January and February was also revised higher by 243,000. The unemployment rate hit 3.5%, and wage growth came in at 3%. Wage growth slightly decelerated. This is contrary to basic economic theory which says that wages should rise as the unemployment rate drops.
Some of the strongest hiring was in construction and healthcare, while sectors related to trade and manufacturing were the weakest. Government hiring contributed 50,000 jobs. Over the next few months, the U.S. government will hire 500,000 temporary workers to conduct its census.
In ordinary circumstances, this would be another "Goldilocks" figure, where the number is strong enough to ensure that corporate earnings keep growing but not so hot that it may lead the Federal Reserve to hike rates. It may be the last significant data point not affected by the coronavirus outbreak. In fact, for this reason, markets barely reacted to the number. Some pre-market losses in stocks were pared but most market participants were more focused on the steep decline in oil and trying to grasp the full impact of the coronavirus.
The report is an indication that the U.S. economy was in good shape prior to the coronavirus outbreak due to strong consumption and a housing market that continues to remain in a secular bull market. One silver lining of the coronavirus situation is that mortgage rates will drop even more to record lows. This should boost demand and put more money in consumers' pockets as they refinance to lower rates. It should lead to more homebuilding and offset some portion of the loss in economic activity.
What Could Have Been
In more normal times, the jobs report gives insight into the economy and the Fed's next move. This time, it's another confirmation that the economy looked to be on the verge of shifting from deceleration to acceleration mode. Due to the global business cycle turning lower in 2018 and the trade war between the US and China, the manufacturing sector was in recession.
This led to a slowing of economic momentum from late-2018 to late-2019. However, it seemed that the worst was over as inventories were low, and new orders were picking up, indicating that the business cycle was ready to turn higher. Additionally, the U.S. and China came to a "phase 1" agreement on the trade deal which removed the possibility of an escalation in the trade war. Obviously, the coronavirus outbreak will hinder this turn. It has already led to a combination of supply chain disruptions and demand destruction with unknowable second-order effects.