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Is the U.S. Jobs Report too Bad to Be True?

Economic IndicatorsMar 08, 2019 10:05AM ET
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Investing.com - For traders obsessed with job creation as a reflection of the American labor market, Friday’s release of the monthly employment report was a dismal message for the U.S. economy. But if cooler heads prevail, one-off data with a background of escalating wages could well paint quite another picture for Federal Reserve policymakers struggling to stay on hold.

“Yes, only 20,000 jobs were added in February, but please do not start freaking out about a recession. One month does not make a trend,” Heidi Shierholz, director of the Economic Policy Institute, said.

She explained that harsh weather contributed to weakness in February with depressing job growth in construction, hotels and restaurants and noted that average job growth for the last three months was 186,000, “a much better reflection of underlying trends”.

James Knightley, ING chief international economist, also put into question Friday’s report. “While the U.S. economy is clearly facing some headwinds, this report seems very odd since it completely contradicts other evidence such as the ISM employment indices, the ADP (NASDAQ:ADP) report and the NFIB jobs number,” he said.

In any case, a long expansion in the American labor market has been reducing slack, providing less and less room for further job creation in an economy that is near full employment.

That is starting to be felt in wage growth which the Fed is closely watching as it keeps open the possibility of a rate hike in the second half of the year.

Average hourly earnings rose 0.4% on the month, above forecasts for a 0.3% rise, and by 3.4% on an annualized basis, its highest in 10 years. For most of the expansion, wage increases have lagged an otherwise healthy labor market.

Former New York Fed president William Dudley warned earlier this week that investors should not assume the pause in policy tightening meant that the U.S. central bank was done raising rates.

“People should be careful about jumping to such conclusions. Although the Fed is likely to stay on hold for the next few months, after that it’s anybody’s guess,” he wrote in an opinion piece for Bloomberg published on Wednesday.

Using Dudley’s “few months” as a guideline, that leaves the U.S. central bank three meetings - March 20, May 1 and June 19 - to keep an eye on developments, including the progress on U.S.-China trade negotiations, the global slowdown and an increasingly tight labor market stateside.

Knightley in the meantime emphasized his call for one more Fed rate hike this year, noting the solid health of Corporate America, potential for the global growth outlook to improve if the U.S. and China resolve their trade dispute and the increase in inflation pressures on the back of rising wage growth.

“Consequently, we still think there is a strong case for another interest rate rise this summer, which is clearly at odds with a market pricing the next move as being a cut,” Knightley concluded.

Is the U.S. Jobs Report too Bad to Be True?
 

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Ross Drennan
Ross Drennan Mar 09, 2019 1:49AM ET
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Take the false (PPT) number that was reported in December and fhis one and average them out. You’ll come up with accurate numbers for both months.
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Jay Fernandez
Jay Fernandez Mar 08, 2019 3:35PM ET
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1 month is enough for Trump to take credit for the economy in jan 2017. Interesting that it isn't enough now
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2 1
Fang Zhao
Fang Zhao Mar 08, 2019 3:20PM ET
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I consider every other report (Unemployment rate, wages) are positive I see no reason to believe it indicate a job market crash
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0 0
John Miller
John Miller Mar 08, 2019 1:08PM ET
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It's a ruse. When its updated it will be up.
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0 3
Ivo Investor
Ivo Investor Mar 08, 2019 12:40PM ET
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About 390K non-agricultural employees were unable to work because of weather conditions last month, the highest total since January 2018 and well above the February average.
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3 0
Deepak Mehta
Deepak Mehta Mar 08, 2019 12:40PM ET
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Farse people worked from home
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0 0
Deepak Mehta
Deepak Mehta Mar 08, 2019 12:40PM ET
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So the data is true
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Deepak Mehta
Deepak Mehta Mar 08, 2019 12:40PM ET
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How much of a weather has impact in internet age. This just excuse news to cover
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0 1
Marshall Hiepler
Marshall Hiepler Mar 08, 2019 12:40PM ET
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Exactly. Cherry-picking data allows any story to be told.Now, the wise reader knows that Spring is just 12 days away, and the situation will change. Just because Chicken Little is running in circles ... does'nt necessarily mean the sky is falling.
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2 0
Christoph Willywonka
Christoph Willywonka Mar 08, 2019 11:38AM ET
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how many more bad economic reports have to come out before they are no longer "one off reports"
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6 0
Deepak Mehta
Deepak Mehta Mar 08, 2019 11:38AM ET
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Almost all of them are bad reports not one off
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1 1
rocco cafaro
rocco cafaro Mar 08, 2019 11:37AM ET
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let's pray for it not happens
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0 0
Aminu Umar
Aminu Umar Mar 08, 2019 11:33AM ET
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What does that mean to Financial market
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0 1
Marshall Hiepler
Marshall Hiepler Mar 08, 2019 11:33AM ET
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It means exactly what a reader, who only reads the first paragraph will comprehend. Negative news of any kind, equates to fear of market decline, and the resulting sell-off panick drives the market downward. Those, who will read the entire report however, will comprehend the impending short-term dip in the market, and take advantage of the drop in stock values across the board, to purchase bargains that inevitably reap profits once the dust settles.
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1 7
Michael Folsom
Michael Folsom Mar 08, 2019 11:33AM ET
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Marshall, when do you feel that the consumer teaches their debt limit and begin to negatively impact the economy? We've had a debt driven recovery for more than a decade. The minute the Fed raises rates modestly, the market softens. That should tell you how fragile the economy is
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0 0
jerrold minyard
jerrold minyard Mar 08, 2019 10:38AM ET
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read it and weeeep
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0 4
John Smith
John Smith Mar 08, 2019 10:38AM ET
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Why are you weeping. Do you really want your countries economy to fail. Sure sounds like it. Very sad.
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7 1
Mim Jattis
Mim Jattis Mar 08, 2019 10:38AM ET
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yes because it will prevent donald trump from being reelected and that is way more important than avoiding recession. recession is inevitable eventually so let some good come from it
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0 0
Lolek Karolek
Lolek Karolek Mar 08, 2019 10:25AM ET
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politics... Trump is already planning his second term strategy
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6 2
Adrian White
Adrian White Mar 08, 2019 10:25AM ET
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God save us all!
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3 1
Mike McCabe
Mike McCabe Mar 08, 2019 10:25AM ET
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Umm. Can you say Polar Vortex two times? Also. The organization doing the reports works for the president. Are there still Obama holdouts in that organization?
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2 11
Wrongway Whiplash
Wrongway Whiplash Mar 08, 2019 10:25AM ET
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that's pretty ignorant
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4 0
Aleksandar Aleksin
Aleksandar Aleksin Mar 08, 2019 10:24AM ET
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Oil sell ;)
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