Despite a two-year high in unemployment, the US labor market remains resilient with robust hiring
The US jobless rate rose to a two-year high in February, while hiring remained robust, showcasing a labor market that is cooling yet remains resilient.
According to the United States Bureau of Labor Statistics (BLS), non-farm payrolls surged by 275,000 last month, with a downward revision of 167,000 for the previous two months. The unemployment rate increased to 3.9 percent, and wage gains slowed, as reported by the Financial Post.
This gradual shift in the labor market, characterized by moderate job and pay gains, signals a potential for economic expansion without significantly reigniting inflationary pressures. Such conditions provide the US Federal Reserve with the room to consider interest rate reductions within the year.
Employment and wage data, sourced from surveys of businesses and other employers, contrast with unemployment figures from a separate household survey, which noted an increase in unemployed workers.
Part of the rise in the unemployment rate can be attributed to individuals entering the labor force but not finding work immediately.
Service-providing sectors, including health care, leisure, hospitality, and government, led job growth in February, as highlighted in the BLS's survey of establishments.
Following the employment report, the S&P 500 saw an uptick, while shorter-term Treasury yields and the US dollar weakened, amplifying trader bets on a likely interest rate cut in June.
The ongoing creation of jobs and moderate pay increases continue to support consumer spending resilience, despite challenges like higher borrowing costs and prices. The labor market's gradual and somewhat uneven participation rate increase has helped relieve some job market constraints.
Fed officials are closely monitoring the labor market and its implications on consumer spending and inflation.
With the consumer price index for February due next week, Fed chair Jerome Powell, in a recent congressional testimony, highlighted the labor market's strength and the Fed's efforts to sustain growth and a strong labor market while making further progress on inflation.
A significant factor remains the supply-demand dynamics for workers and its impact on wages. Average hourly earnings in February rose 0.1 percent from January and 4.3 percent from a year ago.
This moderation in wage growth, following a significant increase attributed to extreme weather the previous month, suggests a balancing act in managing wage pressures.
This month's jobs report, crucial for Fed officials before their March 19-20 meeting, suggests the US economy isn't heading toward a recession but is nearing conditions that might allow the Fed to achieve its goal of cooling the job market to temper high inflation.
“The February jobs report doesn’t look recessionary. But it does suggest the Fed is getting closer to mission accomplished, calming the hot job market that contributed to high inflation,” noted Bill Adams, chief economist at Comerica Bank.
President Joe Biden, in his State of the Union address, boasted about the job market and manufacturing employment gains during his term, while acting Labor Secretary Julie Su described the jobs report as “the very definition of a soft landing.”
Additionally, the report indicated the participation rate — the share of the population working or looking for work — remained at 62.5 percent, with a notable climb to 83.5 percent for workers aged 25-54, marking a five-month high.
