For now, US labor market remains strong
Each month, the U.S. Department of Commerce releases its much-anticipated employment report. The report tracks the national unemployment rate, job growth and wage growth, among other data, for nonfarm payrolls. It is one of the most significant indicators on the health of the U.S. economy.
Despite the recent global turmoil, so far, the U.S. labor market has remained strong. In February, the national unemployment rate was reported at 3.5%, a 50-year low and down from January’s rate of 3.6%. A massive 273,000 new jobs were added, well above 2019’s stellar monthly average of 178,000. Moreover, December and January’s monthly gains were revised higher by a combined 85,000 additional jobs, to 184,000 and 273,000, respectively. Annual employee wage growth was reported at 3%, hovering near a 12-year high.
Of the 11 sectors tracked by the Department of Commerce, the Top 5 job gains were in Education & Health Services (54,000), Leisure & Hospitality (51,000), Government (45,000), Construction (42,000) and Professional & Business Services (41,000).
But the COVID-19 outbreak is expected to have a sizable impact on the U.S. and global economies. This new virus was first detected in central China on Dec. 31. In late February, the virus breached China’s containment efforts. Global financial markets were battered as the outbreak spread across North America, Europe, the Middle East, Asia and the rest of the world. On Wednesday, the World Health Organization formally declared the COVID-19 virus a global pandemic.
To help gauge both the human and economic impact of this new virus, comparisons are being made to other known viral outbreaks, primarily U.S. influenza – i.e. the common flu. So far this October-May flu season, the U.S. Centers for Disease and Control and Prevention estimates 34 million Americans have contracted influenza, resulting in 350,000 hospitalizations and 20,000 deaths.
Yes, one can easily compare this data to the 125,000+ global cases and near 5,000 deaths caused by COVID-19. However, from an economic standpoint, the issue is not to debate the fatality rate or number of cases and deaths driven by each virus. What is important is to recognize the difference in government and societal responses.
Despite the mounting human toll of influenza each year, people go about their daily lives. But with COVID-19, factories, businesses, stores and places of public gathering are increasingly being closed in cities and countries around the world. In January, China started to quarantine entire cities. On Thursday, Italy placed its entire country under lockdown until March 25. Under government mandate, only emergency and essential businesses and services such as grocery stores and pharmacies will remain open. Italian citizens and residents are only allowed to leave their homes to buy food and medicine.
As expected, preventative measures are increasingly being enacted across the United States. On Wednesday, President Trump imposed a 30-day travel ban on flights from Europe, excluding the United Kingdom and Ireland. The U.S. joins a growing list of dozens of other nations that have imposed similar travel bans from “risk countries” outside of China.
The Chicago Mercantile Exchange Group indefinitely closed its hallowed trading floors at its historic Chicago Board of Trade. The NBA and NHL cancelled the remainder of their seasons. The NCAA cancelled 20 winter and spring championship tournaments, including the men’s and women’s basketball tournaments set to start this month. Across the nation, festivals, concerts, businesses conventions and other public events are being cancelled at record pace.
The end result of these measures will be a sudden and drastic hit to the American economy. Unfortunately, the impact will be magnified by further weakness to the global economy, which in 2019 had its slowest pace of growth in 10 years. The combined domestic and global repercussions of the COVID-19 virus will undermine U.S. trade, consumer spending, business spending, manufacturing – and yes, the U.S. labor market.
Mark M. Grywacheski, Investment Advisor
Opinions expressed herein are subject to change without notice. Any prices or quotations contained herein are indicative only and do not constitute an offer to buy or sell any securities at any given price. Information has been obtained from sources considered reliable, but we do not guarantee that the material presented is accurate or that it provides a complete description of the securities, markets, or developments mentioned.
Quad Cities Investment Group, LLC is a registered investment advisor with the U.S. Securities Exchange Commission.
