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February 2019 Jobs Report: Why You Shouldn't Panic

Growth Trends for Related Jobs

On March 8, the U.S. Bureau of Labor Statistics released its February 2019 report on the national employment situation, with a couple of major takeaways: First, job growth plummeted, and second, wages rose. Economists expected to see about 190,000 new jobs created during the month of February, but instead the U.S. economy only added about 20,000 – one of the worst months of job growth in recent years.

How to React

Those numbers don't necessarily call for panic. People translate jobs reports with bias – for example, an anti-Trump person might read February's job report as a point of failure for the president, while others might see it as a short-term setback following historic economic gains.

Wilmington Trust's chief economist Luke Tilley told Forbes that the Labor Department's jobs reports, and specifically its data on job growth, acts as the most accurate indicator for our nation's economic health.

"Jobs growth is the single best indicator of how the economy is doing," Tilley said. "It shows both how many people are being added to payrolls. It tells you much people are being paid, and also any job that is added is a sign of strength of a company's order book and their prospects going forward."

That said, slowing job growth may also indicate that the economy is nearing full employment – and that's good news for workers.

Why Job Growth Slowed

We should first note that the Labor Department's jobs report does not explain the drop in job growth. However, signs point toward a tightening market, in which the United States is reaching full employment. The national unemployment rate also fell in February from 4 percent to 3.8 percent, one of the United States' lowest unemployment rates in half a century. This also supports the theory of a tightening job market.

However, Jack Kelly wrote in Forbes that he questions the claim of a tight labor market, in which job offers would likely increase to attract applicants from a smaller pool of job-seekers.

"But we are not seeing this happen," Kelly wrote. "A tight job market would also require materially enhancing the compensation of existing employees in an effort to retain them in a tight job market. We are not seeing this happening either."

Diane Swonk, chief economist for Grant Thornton, told Forbes the drop in job growth may be partially attributed to weak manufacturing and rough weather across the country in recent months. Bloomberg economist Tim Mahedy attributed it to a "payback from a strong January gain."

"It will, and should, raise some eyebrows, but we'll need a couple more months of data before we have a clear picture of where the labor market is headed in 2019," Mahedy told Forbes.

Increasing Wages

In more obviously positive news, wage growth has been improving in recent months across the United States. Average annual earnings grew by 0.4 percent between January and February, increasing by 3.4 percent year-over-year. Investopedia pointed out particularly strong wage growth in the retail, leisure, information and hospitality sectors. Workers in the private sector, excluding farmworkers, saw an average 11-cent hourly raise during February, boosting their average hourly wage to $27.66. In January, by contrast, average hourly wages increased by only 2 cents.

LPL Research chief investment strategist John Lynch told Investopedia that we can interpret strong wage growth as a sign of continued economic health.

"While payroll growth has slowed, job gains over the past few months have been unexpectedly strong," Lynch said. "Labor market strength remains a bright spot for the U.S. economy, and wages are growing at a healthy pace."

Higher wages support stronger consumer demand, which contribute to a growing economy overall. The growth may slow, but Lynch predicts that it will continue through 2019.