WASHINGTON: US employers maintained a robust pace of hiring in February, giving the economy a strong boost heading into the coronavirus outbreak, which has stoked fears of a recession and prompted an emergency interest rate cut from the Federal Reserve.
The Labour Department’s closely watched monthly employment report on Friday also showed solid wage growth and the unemployment rate falling back to near a 50-year low of 3.5 per cent. Employers also increased hours for workers last month.
But the strong report likely does not capture the impact of the coronavirus, which spread in the United States beginning in late February, leaving financial markets and economists to anticipate severe economic disruptions in the months ahead. Financial markets view the virus, which causes a flu-like illness, as the catalyst that could interrupt the longest economic expansion on record, now in its 11th year.
US Treasury prices rallied, with the yield on the benchmark 10-year government bond dropping to a record low of 0.695 per cent. The dollar fell against a basket of currencies. Stocks on Wall Street tumbled, with the Dow Jones Industrial average diving more than 800 points at one point.
“Sadly, these job numbers are sure to be eclipsed by response to the spread of the coronavirus,” said Michael Hicks an economist at Ball State University. “The supply shocks from quarantined factories in Asia are weeks away from idling US factories, and the demand-side impact on tourism, travel, eating and drinking establishments is already being felt across the world. The March jobs report, will be far less optimistic’’.Nonfarm payrolls increased by 273,000 jobs last month as
unreasonably mild weather continued to boost hiring in weather-sensitive sectors, matching January’s tally, which was the largest gain since May 2018.
While transportation and warehousing payrolls fell by 4,000 jobs in February, suggesting some early impact from the coronavirus, that was erased by strong gains nearly across all sectors, including government. The economy created 85,000 more jobs in December and January than previously reported.
Economists had forecast payrolls increasing by 175,000 jobs in February. Employment gains averaged 243,000 per month in the last three months. The economy needs to create roughly 100,000 jobs per month to keep up with growth in the working-age population.
The government canvassed business in mid-February, before the country reported deaths from the virus and rising infections starting in the final week of the month.
At least 14 people have died in the United States from the respiratory disease called COVID-19 caused by the coronavirus and more than 200 have been infected. The disease has spread across 20 states. Overall, the fast-spreading disease has killed over 3,000 people and sickened nearly 100,000, mostly in China.
The highly contagious virus has rattled investors, resulting in the Fed on Tuesday slashing its benchmark overnight interest rate by a half percentage point to a target range of 1.00 per cent to 1.25 per cent. It was the US central bank’s first emergency rate cut since 2008 at the height of the financial crisis.
Fed Chair Jerome Powell acknowledged the economy’s strong fundamentals, but said “the coronavirus poses evolving risks to economic activity’’.
Financial market are expecting further rates cuts at the Fed’s March 17-18 policy meeting.
Economists say fiscal stimulus is needed to cushion the economy against the disruptions from the coronavirus, though many are not yet forecasting a recession. Growth estimates for the first half are around 1 per cent. The economy grew 2.3 per cent in 2019. — Reuters
Oman Observer is now on the WhatsApp channel. Click here
