U.S. adds meager 20,000 jobs in February to mark smallest increase in 17 months

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The U.S. economy added just 20,000 new jobs in February after big gains in the prior two months, but the unemployment rate fell again and wages rose sharply.

The numbers: American businesses and other employers created the fewest new jobs in February in 17 months, the latest sign of a broader slowdown in the U.S. economy.

The economy added just 20,000 new jobs last month, the smallest gain since September 2017, the government said Friday.

The number of new nonfarm jobs created last month was well below the 172,000 MarketWatch forecast, but the slowdown was probably exaggerated by seasonal oddities that are unlikely to persist. The U.S. has been adding more than 200,000 new jobs a month for the past year, including a revised 311,000 increase in January.

Hiring sputtered in February in construction, retail and shipping and was muted in most other industries.

The pace of hiring is still strong enough, however, to keep downward pressure on the nation’s unemployment rate, especially in a tight labor market in which good help is hard to find.

The jobless rate slipped to 3.8% from 4%, mostly because fewer people said they were unemployed. Last year unemployment fell to a half-century low of 3.7%.

An ultra-tight labor market, what’s more, is forcing companies to offer better pay and benefits to attract or retain workers. The amount of money the average worker earns jumped 11 cents an hour to $27.66 last month.

The increase in pay in the past 12 months climbed to 3.4% from 3.2%, the biggest gain since the end of the last recession in 2009.

What happened: The biggest dropoff in hiring in February took place in construction, where employment fell 31,000 after a 53,000 increase in January. The sharp swing in employment is likely evidence that government statisticians had trouble with seasonal adjustments.

Retailers and shippers also cut jobs.

Hiring was strongest among professional firms and health-care companies. Professional firms created 42,000 new jobs and health providers added 21,000 jobs.

Economists figure the U.S. needs to add about 100,000 jobs a month to absorb the number of people entering the labor force — immigrants, high school and college grads, moms or retirees going back to work. The labor force has been growing more slowly because of an aging population and tighter immigration restrictions, among other things.

Read: Trade deficit soars to 10-year high, foiling Trump White House efforts to rein it in

Also Read: Don’t blame oil for surging trade deficit – it’s all the other stuff Americans buy

Big picture: The U.S. is not growing as fast as it was last spring or summer and companies might be less willing to hire, but the economy is not about to fall into a ditch despite what the February jobs report seems to indicate.

A chief reason is the strong labor market: Wages are rising, unemployment and layoffs remain near a half-century low and job openings are at a record high.

So long as consumers are working and spending, companies are unlikely to see the kind of hiccup in sales that would force them to slash jobs. Their biggest worry right now is a slowing global economy that’s crimped exports, but if the U.S. and China strike a deal and end a damaging dispute over trade, it could go a long way in easing some of those worries.

Read: The rise of the robots and decline of inflation: How AI is keeping prices low

Market reaction: The Dow Jones Industrial Average

DJIA, -0.78%

and S&P 500

SPX, -0.81%

were set to open sharply lower in Friday trades.

The 10-year Treasury yield

TMUBMUSD10Y, -0.82%

fell several basis points to 2.61%. Many loans such as mortgages and auto loans are tied to changes in the 10-year note, whose yield has fallen from a seven-year high of 3.23% in October.

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