The U.S. economy faces a stern test in the coming months as the coronavirus spread shutters factories, slows business activity and cripples transport demand all over the world and raising real concerns for a near-term recession.
Against this grim backdrop -- which the International Monetary Fund warned earlier this week could worse if the spread of the virus accelerates -- the job market will be key plank in the U.S. economy's ability to weather a global downturn.
Analysts estimate that employers added 175,000 new jobs to the economy last month, a notably lower total than the 225,000 created in January but a tally that's still largely in-line with the monthly average recorded over the whole of 2019. Those gains would peg the headline unemployment rate at 3.5%, Wall Street forecasts suggest, while hourly wages are expected to rise by 0.3% from the previous month.
"Whatever the number, this report is old news," said Ian Shepherdson of Pantheon Economics, who expects a softer February reading of 140,000. "The coronavirus is likely to start hitting job growth very soon, as hiring is scaled back and layoffs rise."
With U.S. stocks rising to record levels as recently as February 19 and coronavirus headlines largely isolated to China and the Asia region for the first three weeks of last month, most economic data releases have yet to capture the domestic impact of the outbreak.
"We don't yet know if COVID-19 is a seasonal virus, but if it is, Europe and the U.S. in March are in a much better position than China in December," Shepherson argued. "If the virus is not at all seasonal, the outlook is much worse, and the risk of tens of millions of infections is greater."
In either event, the U.S. economy is going to rely on its consumers -- which drive around two-thirds of economic growth, to weather the storm.
Consumer strength, in fact, was cited by President Donald Trump during a rally in Scranton, Pennsylvania last night, where he noted that while COVID-19 "certainly might have an impact ... at the same time, I have to say people are now staying in the United States spending their money in the U.S., and I like that."
"It's going to all work out. Everybody has to be calm," Trump added. "We have plans for every single possibility and I think that's what we have to do. We hope it doesn't last too long."
If it does, however, investors know exactly where to look for support: the Federal Reserve.
Benchmark 10-year Treasury note yields tumbled to a fresh all-time low of 0.77% in overnight trading Friday as markets continue to price in deeper near-term rate cuts in order to inoculate the U.S. economy from either a global slowdown or a domestic hit from the coronavirus.
CME Group futures suggest a 66.1% chance of a 50 basis point cut when the Fed makes its next rate decision on March 19, with a 58.1% chance of a follow-up move in April.
"If the report is solid, markets will discount it as a backwards-looking indicator," said ING's chief foreign exchange strategist Petr Krpata. "If disappointing, it will be seen as further evidence of downside risks building in the US economy, making the case for additional Fed easing."