The Worst Jobs Report Since 2017

The big story today is the February jobs report.

In the parlance of the trade, it was a “miss.” And not by a jot, not by a tittle, not by a whisker.

Economists as a whole divined the economy would add 175,000 jobs last month.

What was the actual number?

A mere 20,000 — miles and miles beneath expectations — and the worst monthly showing since September 2017.

Consider: The United States economy has averaged over 200,000 new jobs 12 months running.

Among the report’s “highlights”:

Manufacturing jobs fell 8,000 below estimate. Retail jobs disappointed to the sour tune of 6,100. Construction jobs fell a full 31,000 short of the glory.

Today’s report sent stocks into red numbers for the fifth straight day — despite a late uprising.

The Dow Jones closed the day down 23 points. The S&P lost 6, the Nasdaq 13.

But markets should take heart…

Bad News Is Good News for Stocks

Today’s unemployment report means Jerome Powell will not be raising interest rates soon.

In fact, we suspect Mr. Powell is inwardly pleased today.

The report gives him every excuse to hold — or even cut rates.

And the president will stop battering him about interest rates.

Affirms Mark Hamrick, senior economic analyst for

“All of this shows the Federal Reserve can continue to wait before raising interest rates, if at all this year.”

Today fed funds futures are in fact giving a 25% chance of a rate cut by next January — up 5% from yesterday.

What precisely does this morning’s grim report portend for the American economy?

“The sharp slowdown in payroll employment growth in February provides further evidence that economic growth has slowed in the first quarter,” says Michael Pearce, senior U.S. economist at Capital Economics.

“This is a disappointing report,” moans Carl Tannenbaum, chief economist of Northern Trust, adding:

“I don’t think there’s any way to sugarcoat it.”

But that does not mean the rah-rah men did not try…

Mother Nature and Uncle Sam Are to Blame

It was the month’s lousy weather, they bellow. Of course construction jobs are down. And do not forget about the government shutdown.

On hand with his sack of sugar was professional optimist Larry Kudlow, the president’s economic point man.

“Fluky,” is how he describes this morning’s report:

I think you have timing issues with respect to the government shutdown, winter seasonal issues. I think it’s very fluky. I wouldn’t pay any attention to it to be honest with you.

“I think the federal shutdown and the weather are playing games with the numbers,” adds Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.

Just so.

We are in no position to question a director of the United States National Economic Council… or a chief investment officer at Independent Advisor Alliance.


The professional men had forecast 175,000 jobs.

Were they not aware of the lousy weather… the government shutdown… and all the temporary hobgoblins tormenting February’s employment market?

What is the point of having experts?

Mr. Jonathan Doe or Mrs. Jane Doe could scarcely botch things so badly.

And if the number did come ringing in at 175,000 — depend on it — the same experts would seize upon it as proof of a raging economy.

We wonder when they will be exhausted of excuses.

Nearly 10 years running, disappointing economic data have resulted from the weather. Or this temporary malady. Or that brief detour.

It has been a permanent chasing of rainbows.

Yet there has been no pot of gold at rainbow’s end.

Perhaps today’s woeful unemployment says what it means and means what it says…

The “New Normal”

The economy is staggering to a crawl.

GDP growth peaked at 4.2% in last year’s second quarter.

The quarters following turned in 3.4%… and 2.6%.

After today’s botchwork you must dose any expert prognostication with heaping amounts of table salt.

But Goldman now projects 0.9% Q1 GDP growth.

The Federal Reserve’s New York garrison has it at 0.88%.

Its Atlanta branch now estimates Q1 growth of merely 0.5%.

Meantime, the New York Fed’s No. 1 man says he expects 2019 GDP to print just 2%.

But the same John Williams is neither concerned… nor surprised.

Diminished growth is merely the “new normal”:

I know this talk of slowing growth is causing uncertainty, some hand-wringing and even fear of recession. But slower growth shouldn’t necessarily come as a surprise. Instead, it’s the “new normal” we should expect.

But with the highest respect to Mr. Williams… why shouldn’t we expect more?

Plenty of Bang, Not Much Buck

The United States government has borrowed in excess of $10 trillion over the prior decade.

$10 trillion is plenty handsome.

Yet that $10 trillion of debt yielded only $3 trillion of real GDP.

To hone in closer, the nation’s debt increases roughly $100 billion per month.

But GDP only increases some $40 billion per month.

We are getting plenty of buck, that is. But not much bang.

The nation’s debt-to-GDP ratio already exceeds 100% — its highest since WWII.

But where are the Nazis? Where are the Japanese?

What Manhattan Project is the United States government financing?

The standard formula says deficits should decline during economic expansions. Come the inevitable recession, the government then has a full war chest to throw at it.

But a decade into the current expansion… the Treasury is depleted.

And the debt-to-GDP ratio is projected at 115% within three years.

Meantime, the Federal Reserve expects long-term GDP growth of 1.9%.

It is a grim calculus.

So Far, So Good

Yet the president of the New York branch of the Federal Reserve is unconcerned.

We are reminded of the blind fellow who falls off the 100-story building.

“So far, so good,” he assures himself 80 floors down.

We suspect the United States is 80 floors down. Or perhaps 73. Or 68.

Either way, the pavement is coming up fast…


Brian Maher
Managing editor, The Daily Reckoning

The Daily Reckoning