Why Did the Post-Shutdown Jobs Numbers Get Weird in February?
The Labor Department's monthly jobs report is a closely watched measure of U.S. economic health, and for February, it came with a surprise plot twist: The results -- 20,000 jobs added -- were the worst in a year and half, and were wildly off the mark from the consensus forecast of 180,000. But was seasonality, weather, or President Trump's government shutdown to blame -- or is the data just incomplete?
In this segment from Motley Fool Money, host Chris Hill and senior analysts Andy Cross, Ron Gross, and Jason Moser discuss why they are more focused on other data points like the U6 unemployment rate, the three-month rolling average, and the areas where significant hiring did take place. They also talk about why there was such a wide difference between the private ADP jobs report and the federal government's results.
A full transcript follows the video.
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This video was recorded on March 8, 2019.
Chris Hill: The jobs report for February surprised a lot of people with just 20,000 new jobs added to the U.S. economy. The worst month for job creation in a year and a half. Ron, the consensus expectation was for 180,000 new jobs. How'd we miss by that much?
Ron Gross: The headline is very curious, and by curious, I mean confusing. Twenty thousand, much weaker than expected, so much you have to wonder if, potentially, maybe it's not even correct. There could be seasonality in there. There could be weather. There could be the government shutdown. It seems like something is wrong. It doesn't jive with the ADP report we got earlier in the week, which showed construction sector adding 25,000 jobs. This report today shows the construction sector losing 31,000 jobs. That's a 56,000-job swing. Somebody's wrong there. There's a lot of things going on.
Don't forget, also, this number today, there's a margin of error plus or minus 100,000 jobs. That's a pretty big margin of error. I expect that we will see a pretty large revision once somebody figures out what's going on.
Things to focus on, I think, are the all-encompassing view. Unemployment rate went down significantly to 7.3%, and, a nice wage increase.
Andy Cross: Yeah. I think the overall way to think about this is, you have to remember to take these in three-month or even six-month average estimates. Last year, we were up 223,000 per month when you look at three-month rolling periods. I think it's important to not just take one number into play here.
One interesting point that I did like was, the professional and business services were up 42,000 for the month. That's basically in line with the average over the last year or so. Those tend to be high-paying, well-regarded roles that the U.S. is going to be more responsible for growing over the next decade or so. That one continues to be pretty impressive to me.
Gross: I was going to say, you shouldn't expect to see a robust job growth forever. Once we get closer to full employment, and there's less folks to get jobs out there, you'll see that number come down. I wouldn't be surprised to see that number slowly come down over time. This is just so severe that it makes me think something is a little wonky.
Hill: Safe to assume that we all expect there to be revisions upward when we get the numbers a month from now, but I want to go back to the construction number, Ron. That was the thing that leapt out to me in the initial report. I hadn't seen the ADP numbers earlier in the week. That's one of those things where, not to get greedy here, but not only do I want to see revisions up in a month's time, I want to see that construction number up. If this number is correct and the ADP number is the one that's wrong, that has broader implications for the economy.
Gross: For sure. You would much rather see a robust construction industry, for sure. Now, the ADP report and this report are often at odds with each other. They don't always go in lockstep. It's just not typically as severe of a difference as this.
Hill: I like that they have a margin of error of 100,000 jobs. Wouldn't that be nice?
Gross: I'm going to start doing that.
Hill: Whatever your job is in life, if you had a margin of error that big...
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