Please ensure Javascript is enabled for purposes of website accessibility

3 Reasons Coronavirus Could Make This the Last Good Jobs Report for a While

By Dan Caplinger - Mar 6, 2020 at 10:48AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Despite strong numbers in February, investors should expect disruptions going forward.

Coronavirus fears continued to punish the stock market on Friday, even though the latest data on the employment situation in the U.S. painted a rosier picture of the national economy than many had expected. Despite strong job creation in February, however, there are reasons to expect that the Covid-19 outbreak could have devastating impacts on future jobs reports.

The headline numbers seemed to indicate a strong, robust economy, with nonfarm payrolls rising by 273,000 jobs and the unemployment rate moving down to 3.5%. However, when you look more closely at some of the numbers, you can see where a likely reversal could cause problems going forward.

 Person wearing hard hat and collared shirt.

Image Source: Getty Images

1. Leisure and hospitality jobs were up in February but could reverse quickly

One of the strongest job creators during the month of February was the leisure and hospitality industry. The sector created 51,000 jobs in February, with particularly strong performance in the category of food services and drinking establishments like bars, taverns, and saloons. The arts, entertainment, and recreation category also saw more muted gains, with most of the new jobs coming from the amusements, gambling, and recreation industry.

Much of the early impact that we've seen from the coronavirus thus far, however, has centered on the leisure and entertainment industry. Officials have delayed or are contemplating postponements of everything from sporting events and concert performances to trade shows and conventions. Overseas, closures of theme parks, theaters, and other entertainment venues have been widespread and hurt companies like Disney (DIS 3.51%), and it's quite possible that such moves will start happening in the U.S. in the near future. Ensuing layoffs could have a dramatic impact on the employment situation for the industry, and that would take away one of the areas that has been a source of strength, creating 400,000 new jobs in the past year alone.

2. A big hit to air travel is coming

Another area of the economy that's in line to see massive disruptions is the air travel industry. Already, airlines like United Airlines Holdings (UAL 5.08%) have cut back on their service, and plans to travel less both domestically and abroad are resulting in reduced flight schedules and calls for airline employees to take voluntary unpaid leave to help their employers cut costs.

Air transportation hasn't been a huge driver of employment gains, creating just 1,700 jobs in February. However, those numbers could go sharply negative in the months to come, and that could produce downward pressure that would hurt the entire jobs picture nationwide. Moreover, similar declines in related areas like scenic and sightseeing transportation, rail transport, and transit and ground passenger transportation could have a domino impact across the transportation sector.

3. Falling energy prices are going to hit the oil patch hard

One of the biggest casualties of the coronavirus economically has been the energy sector. Oil prices have plunged in response to expected reductions in demand stemming from less industrial activity. Oil and gas exploration and production companies are feeling the pinch, as falling oil pushes their balance sheets to the brink and risks massive shutdowns.

Oil and gas workers aren't a huge portion of the economy, but the jobs tend to pay well, and oil and gas extraction produced 1,100 new jobs last month and more than 13,000 over the past year. Many of those jobs could disappear in a prolonged downturn for energy. If that happens, it'll hit certain areas of the country hard, adding even more fuel to a disrupted overall economy.

Keep your eyes on the future

Impacts from the coronavirus haven't yet shown up in the U.S. jobs report, but it's just a matter of time. If the outbreak worsens from here, then investors can expect to start seeing second-order effects ripple out across the U.S. economy, eventually affecting millions of employees in many different professions.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Walt Disney Company Stock Quote
The Walt Disney Company
DIS
$109.32 (3.51%) $3.71
United Airlines Holdings, Inc. Stock Quote
United Airlines Holdings, Inc.
UAL
$48.41 (5.08%) $2.34

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
344%
 
S&P 500 Returns
120%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.