Citing the evolving risk to economic activity posed by the coronavirus, the Federal Reserve voted to lower the target range for the funds rate in an out of cycle adjustment by 1/2 percent to 1 - 1-1/4 percent. The February Beige Book summary of current economic conditions noted that the coronavirus was causing negative impacts on travel and tourism, and causing delays in some supply chains. Overall, the summary found that economic activity expanded at a modest to moderate pace, but that some districts fared better than others. The near term economic outlook was described as mostly modest growth with both the coronavirus and upcoming presidential election listed as potential risks.

The Institute for Supply Management’s (ISM) February 2020 report on Manufacturing showed continued but slowing growth as the Purchasing Managers’ Index (PMI) fell from 50.9 in January to 50.1, with GDP estimated to be at 2.1% growth. A contraction in new orders and low inventories contributed to a slump in demand, while consumption slowed as production growth dropped -4.0 points to 50.3, indicating slower growth, and employment rose +0.3 points to 46.9, indicating that employment contraction was slowing. Selected comments from respondents noted the potential impact of the coronavirus on supply chains, although some sectors (plastics & rubber products, furniture, and primary metals) noted increasing sales.

The unemployment rate ticked down from 3.6% to 3.5% in February as 273,000 new jobs were created, and the number of jobs created for both December and January were revised upward to 184,000 (+39,000) and 273,000 (+48,000), respectively. Jobs were created primarily in healthcare (+57,000), restaurants (+53,000), construction (+42,000), professional services (+32,000), and financial activities (+26,000). Government hiring added 45,000 jobs, led by 16,000 education jobs for state governments, and including 7,000 federal census workers. Average hourly pay was up $0.09 to $28.52 for all employees, up +3.0% Y/Y, and up $0.08 to $23.96 for nonsupervisory employees, up +3.3% Y/Y. The U-6 unemployment rate, which is a more comprehensive rate that includes part time and marginally attached workers, ticked up to +0.1% to 7.0%, up from a low of 6.7% in December.