Stalled job growth could be warning of slowdown but no signal of recession


Stock futures dipped after the jobs report, but were already lower after very weak Chinese export data renewed fears of a global slowdown. Treasury yields, already lower, fell slightly. The 2-year yield slipped to 2.45 percent.

A positive in the report was the so-called real unemployment rate, which dropped to an 18-year low of 7.3 percent from 8.1 percent last month. That number includes discouraged workers as well as those holding jobs part time for economic reasons.

“The modest response in Treasury yields would be consistent with a willingness to look through this data until we’re seeing broad based signs of slowing to stall speed,” said Jon Hill, BMO rates strategist.

Economists have been expecting growth to slip under 2 percent in the first quarter due to typical weak activity in winter, the government shutdown, extreme cold weather and the trade war with China. They do expect a bounce back to a pace above 2 percent in the second quarter.

Also on Friday, housing starts for January were reported to have increased a surprise 18.6 percent, the fastest pace in eight months.

“Anybody who is mentioning the word ‘recession’ is wrong. The economy invariably slows in Q1. What we don’t know is it more than usual, and the poor quality and volatility in the data since the government shutdown has made it impossible to assess,” said McCarthy.

LaVorgna said while potentially an outlier, the weak jobs number could also be signaling that job growth has peaked.

“The point is it’s no longer 200,000. It’s sub 200,000 gains on the back of weaker global growth and there’s evidence the jobs market is not going to revert back to a sustainable 200,000 because the [unemployment] claims have been rising and the factory sector, if you looked at ISM, certainly looks like it peaked as well,” said LaVorgna.



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