March 2019 National Economic Outlook

Weak February Job Growth, and Slow Retail Sales at the End of 2018

The U.S. economy added just 20,000 jobs in February, far below consensus expectations for a gain of 180,000. This was the smallest number of net jobs created in a month since September 2017, when Hurricanes Harvey and Irma weighed on hiring. There were combined upward revisions of 12,000 in December and January.

  • Private-sector hiring was 25,000 in February. Despite the very weak February report, job growth has averaged 186,000 over the past three months.

  • The unemployment rate fell to 3.8 percent in February from 4.0 percent in January as government workers who had been on unpaid furlough because of the partial government shutdown, and were counted as unemployed in January, moved back into employed status. This is just slightly above the cyclical low unemployment rate of 3.7 percent in September and November of last year.

  • Average hourly earnings rose 0.4 percent over the month after a gain of less than 0.1 percent in January. Year-over-year growth in wages was 3.4 percent in February, the strongest gain since March 2009.

U.S. gross domestic product, adjusted for inflation, increased 2.6 percent at an annual rate in the fourth quarter of 2018, better than the 2.4 percent consensus. This was the “initial” estimate from the Bureau of Economic Analysis. It combined the “advance” and “second” estimates; the advance estimate was canceled due to the partial government shutdown earlier this year.

This was a solid result, although growth slowed from the second and third quarters. Real GDP increased 2.9 percent in 2018 from 2017, averaged across the four quarters of the year. On a year-over-year basis real GDP growth was 3.1 percent in the fourth quarter, up from 3.0 percent in the third quarter. Consumer spending and business investment led overall economic growth in the fourth quarter.

Retail sales rose 0.2 percent in January, slightly better than the consensus expectation for a 0.1 percent increase. But this followed a huge 1.6 percent drop in December, revised even lower from the initially reported 1.2 percent decline.

December was the biggest monthly drop since September 2009, after federal incentives for new car buyers expired. January details were better than the headline number. December’s decline does not appear to be related to data problems from the government shutdown. The big drop in stock prices in late 2018 may have spooked consumers.

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March National Economic Outlook

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