Employers added 311,000 jobs in February, the Labor Department reported Friday, continuing a hotter-than-expected streak that created plentiful jobs while thwarting the Federal Reserve in its push to contain stubborn inflation.
The unemployment rate rose to 3.6 percent, still an exceptionally low level resulting from strong job creation and the slow return of workers to the workforce after the pandemic. It was 3.4 percent in January, the lowest level since 1969.
Employment has been a continuing source of dynamism in the economy even as other components have lost steam or pushed back higher interest rates. However, there were signs in the February report that the deep malaise in the labor market may be easing.
An influx of more than 400,000 job seekers has raised the bar The labor force participation rate, which was slow to recover as the seniors retired early. The rate for those in their prime years of work — ages 25 to 54 — jumped to 83.1 percent, surpassing the pre-pandemic level.
Wages grew 0.2 percent from January to February, a sustained slowdown and the smallest increase since February 2022. That is likely to provide some relief to Fed policymakers, who have closely watched earnings as a driver of inflation.
Employment gains were again led by industries such as leisure and hospitality, which added 105,000 jobs, but were still 2.4 percent lower than three years ago.
“Some of these sectors, especially services, are still recovering from the pandemic,” said Eugenio Aleman, chief economist at financial services firm Raymond James. “I think that kind of puts the idea of a recession in question.”
Construction, which has grown steadily even as the housing market entered a deep freeze, continued to add jobs, as did health care, retail, and professional and business services.
However, other sectors clearly lost momentum. The information industry, which includes many large technology companies, has shed 25,000 jobs with layoffs in Silicon Valley. Merchandise-related industries—including manufacturing, as well as transportation and warehousing—were steady to passive as retailers burned their bloated inventories, reducing the need for new orders and for people to move things from place to place.
Defying some expectations, the huge January jobs gain was revised downward only slightly, remaining – for now – at a very strong 504K jobs.
The new batch of data adds to a cacophony of economic indicators, some of which suggest businesses and consumers are ramping up after absorbing the Fed’s largest interest rate hikes in 2022. Others, such as Percentage of workers who quit their jobscontinues to sink back to Earth after extraordinary increases over the past three years.
Another big data point will come on Tuesday with the CPI reading for February. The year-on-year increase was 6.4 percent in January.
The Fed was expected to stick to a slower path of interest rate increases, moving in increments of a quarter of a percentage point. But Jerome H. Powell, the Fed chair, warned this week that if new data shows the economy isn’t slowing enough to keep inflation in check, policymakers may opt for a larger hike at their March 21-22 meeting.
“The big upshot is that it reduces the chances of a soft landing a bit,” said Brad Hirschbein, chief economist at WE Upjohn Institute for Employment Research, pointing to the ability to tame inflation without triggering a recession. “The broader pattern remains consistent with a gradual cooling of the labor market, but more gradually than the Fed would like.”
So far, severe labor shortages in some areas have left employers extremely reluctant to lay off workers even as business fades in some industries. This has allowed total employment to expand even as the rate of recruitment – the speed at which employers add new workers – has slowed considerably.
But that patience may run out if the Fed also succeeds in slowing demand for services like restaurants and airlines, as millions of job vacancies continue to drive strong wage growth and consumers show no sign of abating.
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