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

February’s job success slowed to a crawl with just 20,000 payrolls added, but it is more the result of temporarily sluggish growth and not a device of recession.

The shockingly weak report was about 160,000 fewer jobs than economists had forecast, but it follows January’s surprisingly numerically 311,000 payrolls, which were revised higher by 7,000 workers. The unemployment rate also fell by 0.2 part point to 3.8 percent and average hourly wages grew at an annual pace of 3.4 percent.

“I don’t think there’s a economic downturn on the horizon. However, the market has to grapple with a slowing economy against the backdrop of a much weaker global environs and therefore questions about the U.S. ability to remain decoupled from the rest of the world will persist,” said Joseph LaVorgna, chief economist for the Americas at Natixis.

Economists were astute to point to the fact that the government data has been inconsistent since the government shutdown and may have been mannered by both the 35-day shutdown and a temporary work furlough for government employees and private sector contractors. White Sporting house economic advisor Larry Kudlow called the number “fluky” in an interview on CNBC’s “Squawk on the Street.”

“Right now, we’re subdue waiting to get enough consistent data so we can assess what’s going on. At this point, these numbers don’t do that,” disclosed Ward McCarthy, chief financial economist at Jefferies. “In some respect, it’s not dissimilar to the December retail sales mobs that were so weak they weren’t believable.”

The delayed January retail sales report is scheduled to be freed Monday, and economists are watching to see if there is a revision to December’s 1.2 percent decline.

“We had the teacher’s strike, and government business had a hard time ramping back up so that pulled a lot of things down. There’s a lot of noise in the payroll data,” voted Diane Swonk, chief economist at Grant Thornton.

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

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

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

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

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

“Anybody who is mentioning the word ‘set-back’ 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 details since the government shutdown has made it impossible to assess,” said McCarthy.

LaVorgna said while potentially an outlier, the feeble 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 encourage 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 arrange been rising and the factory sector, if you looked at ISM, certainly looks like it peaked as well,” said LaVorgna.

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