The U.S. economy added 20,000 jobs in February — a number far below expectations and possibly distorted because of underlying factors such as severe weather and the recent government shutdown, economists said Friday.
Other economic indicators were strong. The unemployment rate ticked back down to 3.8 percent after a brief rise in January to 4 percent because of federal workers furloughed during the shutdown. February’s unemployment rate was also lower than December’s 3.9 percent.
Wages increased at a strong rate. Average hourly earnings rose 11 cents in February to $27.66. That marks a 3.4 percent wage hike from last year and a solid step above the annual inflation rate, which dropped to 1.6 percent in January.
What happened to hiring?
Economists typically focus on trends that span several months, instead of in any single report, because of one-off factors that can significantly affect the data. In the past three months, job gains have been particularly strong.
For example, construction hiring was strong in January, likely spurred by a stretch of good weather. But that hiring wasn’t sustainable and may have led to February’s drop in construction jobs, said Betsey Stevenson, an economist at the University of Michigan who served on the Obama administration’s Council of Economic Advisers.
Winter storms in February could have also had a negative effect on the leisure and hospitality sector, which saw no job gains in February.
Another factor: the partial government shutdown.
The shutdown that ended in late January had a broader effect than economists first realized, said Mark Hamrick, senior economic analyst at Bankrate.com.
A drop in consumer confidence in January, as well as the financial strain the partial government shutdown put on more than 800,000 federal workers and contractors. All of this likely affected consumer spending and hiring.
Economists will be closely watching the jobs numbers and other reports in the coming months to determine whether those negative factors were one-time blips, or if they signal a larger economic downturn.
“The end of the expansion itself should not be a surprise, but we don’t think it should be occurring immediately,” Hamrick said.
What you should make of wage growth
Hourly pay has continued to rise in recent months after years of largely flat wages.
“It shows that all things considered, the jobs situation is finally achieving what it should this late in the expansion: good job growth, really good wage growth,” said Robert Frick, a corporate economist with Navy Federal Credit Union.
Strong wage growth means people looking for a pay raise might consider switching jobs because employers are more willing to boost salaries and provide training to attract new talent, Frick said.
Other economists also welcomed the increase in wages.
“It’s great to see stronger wage growth as the labor market tightens,” Stevenson said.
But she said there are still two questions that remain unanswered: Are workers earning the higher wages because they are being more productive? And are the wage increases being taken from the salaries of the CEOs and shareholders, or are they going to be passed on to consumers in the forms of higher prices?