By Andrew Moran
The U.S. economy added 311,000 new jobs in February, down from 504,000 in January, according to the Bureau of Labor Statistics (BLS). Economists had projected 205,000 new positions last month.
The unemployment rate climbed to 3.6 percent, up from 3.4 percent, and matched market expectations. The labor force participation rate edged up to 62.5 percent.
Average hourly earnings rose to 4.6 percent year-over-year, up from 4.4 percent. On a month-over-month basis, average hourly earnings jumped 0.2 percent. Average weekly hours dipped to 34.5, down from 34.6.
The leisure and hospitality sector accounted for much of the employment gains, with 105,000 new jobs in February. Retail trade added 50,000 new jobs, followed by government (46,000) and health care (44,000). The construction industry added 24,000 new positions.
Three sectors experienced declining employment. The information industry shed 25,000 jobs, transportation and warehousing lost 22,000 positions, and the manufacturing sector erased 4,000 jobs.
The non-farm payroll report found that the numbers of people employed part-time for economic reasons or not in the labor force but want a job were unchanged at 4.1 million and 5.1 million, respectively. The number of people working two or more jobs eased slightly to a seasonally adjusted 7.904 million last month, down from 8.001 million in January.
The prime-aged labor force participation rate – those aged 25 to 54 – has held steady, but the level for 20- to 24-year-olds has not recovered to pre-pandemic levels, says Cody Harker, Head of Data and Insights from recruitment marketing firm Bayard Advertising.
Reaction
President Joe Biden touted the latest job figures, stating that this further proves that his economic plan is working for the American people.
“I know you’re tired of hearing me say ‘breathing room,’ but I think it’s how people think about a little more breathing room for working families, and today’s job numbers are clear: Our economy is moving in the right direction.”
Meanwhile, the financial market was little changed, with the leading benchmark indexes flat before the opening bell.
The U.S. Dollar Index (DXY), a gauge of the greenback against a basket of currencies, plummeted below 105.00.
The U.S. Treasury market was red across the board, with the benchmark 10-year yield down slipped below 3.9 percent.
“Following an unexpectedly strong January, February’s job gains beat expectations again in another display of resiliency for this labor market. And as layoffs in tech and a handful of other industries continue, COVID-sensitive verticals are posting consistent, steady growth,” said Cody Harker, Head of Data and Insights from recruitment marketing firm Bayard Advertising, a note.
This could provide the Federal Reserve with more breathing room to continue raising interest rates higher than the previous forecast of 5.1 percent.
However, Bryce Doty, a senior portfolio manager and vice president at Sit Investment Associates, says that larger rate hikes might not be set in stone because of slower wage growth.
“The jobs data provides a huge relief for investors fearing the Fed raising rates by half a percent,” he wrote in a note. “Given Fed Chair Powell’s fear of higher wages causing inflation, this should calm that fear.”
Latest Labor Trends
Before the February jobs report was released, other labor-related statistics were published.
The ADP National Employment Report revealed that private businesses created 242,000 jobs in February, up from an upwardly revised 119,000 in January. This also topped the market estimate of 200,000. The services sector accounted for most of the job creation, including leisure and hospitality (83,000), financial activities (62,000), and education and health services (35,000).
“There is a tradeoff in the labor market right now. We’re seeing robust hiring, which is good for the economy and workers, but pay growth remains quite elevated,” said Nela Richardson, the chief economist at ADP.
The number of job openings came in at 10.824 million in January, down from an upwardly revised 11.234 million in December. This was also higher than economists’ expectations of 10.5 million. Job quits fell below 3.9 million, while the quit rate slipped to 2.5 percent.
In February, U.S.-based employers announced 77,770 layoffs, the highest figure for the month of February. But this was down from the 102,943 terminations to kick off the year. In total, companies have announced plans to cut more than 180,000 jobs, up 427 percent from the first two months of 2022.
Moreover, this year, the tech sector has represented more than one-third (35 percent) of all job cuts.
“Certainly, employers are paying attention to rate increase plans from the Fed. Many have been planning for a downturn for months, cutting costs elsewhere. If things continue to cool, layoffs are typically the last piece in company cost-cutting strategies,” said Andrew Challenger, senior vice president of Challenger, Gray & Christmas, Inc., in a statement.
Initial jobless claims were hotter than expected, rising to 211,000 for the week ending March 4, up from 190,000 in the previous week, according to the Department of Labor (pdf). Continuing jobless claims surged to 1.718 million, up from 1.649 million. The jobless claims four-week average inched higher to 197,000.
While market observers purported that this was a potential indicator that the Federal Reserve’s tightening is beginning to impact the jobs arena, some experts cited New York as the primary reason for the jump in the number of Americans filing for unemployment benefits.
“Jobless claims are a head fake. When N.Y. schools go on break, school workers can file for benefits. Guess what happened last week? N.Y. claims rose by 16,000 over the prior week,” Michael McKee, an international economics and politics correspondent for Bloomberg TV, posted on Twitter. “A nice ‘Fed tightening is starting to work’ narrative unravels.”
Despite the U.S. central bank aiming to raise interest rates heading into the summer, Fed Chair Jerome Powell informed the Senate Banking Committee on Tuesday that policymakers no longer believe that the institution must dismantle the labor market to fight inflation.
