Unemployment rate rising slightly, Fed expected to continue rate hikes in light of strong job data.
The US economy delivered robust employment growth in February, likely prolonging the Federal Reserve’s rate hike, although wage inflation showed signs of cooling down.
Nonfarm payrolls rose by 311,000 jobs last month, the labor department’s closely followed employment report showed on Friday. Data for January was revised down to show that 504,000 jobs were added instead of the previously reported 517,000.
Economists polled by Reuters had forecast job growth of 205,000. They said the economy needs to create 100,000 jobs a month to keep up with the growth in the labor force.
Estimates for February payrolls ranged from as low as 78,000 to as high as 325,000 jobs.
The larger-than-expected increase in payrolls suggested that January’s increase in hiring was no fluke.
Economists had argued that job growth in January was flattered by a host of factors, including unseasonably warm weather, annual benchmark revisions of the data and overly generous seasonal adjustment factors, the model the government uses to extract seasonal fluctuations from the data. The strong growth in consumer spending in January was also partly attributed to seasonal factors.
The average hourly wage rose by 0.2 percent last month, after a gain of 0.3 percent in January. That pushed the year-over-year wage increase from 4.4 percent in January to 4.6 percent, in part because last year’s low numbers fell out of the calculation.
Fed Chair Jerome Powell told lawmakers this week that the U.S. central bank is likely to raise rates more than expected. Ahead of the employment report, financial markets had priced in a 50 basis point rate hike at the Fed’s March 21-22 policy meeting, according to the CME Group’s FedWatch tool.
The Fed has raised its key rate by 450 basis points since last March from near zero to its current range of 4.50 percent to 4.75 percent.
The labor market has remained tight and initial claims for unemployment benefits have remained very low, despite high-profile layoffs in the technology industry.
Data this week showed there were 1.9 job openings for every unemployed person in January, while the Fed’s “Beige Book” report described the February job market as “solid” and noted “scattered reports of layoffs” and that ” finding employees with the desired skills or experience remained challenging.” The perception of households on the labor market was also quite positive last month.
The unemployment rate rose from 3.4 percent in January to 3.6 percent in February, the lowest since May 1969.
However, some economists cautioned against overemphasizing the narrow measure of unemployment, preferring instead a broader measure of unemployment, including people who want to work but have given up looking and those who work part-time. work because they cannot find work. full-time work.
This so-called “U-6 unemployment measure” stood at 6.6 percent in January, meaning 10.9 million people were available to work, up from the 10.8 million job openings at the end of January, suggesting that the labor market was in balance. used to be.