U.S. employers added 275,000 jobs in February, outpacing expectations and exceeding January’s gain, illustrating that the labor market remains strong despite high interest rates, inflation and slowing economic indicators. Unemployment rose to 3.9%, the highest rate since January 2022. Year-over-year wage growth rose to 4.3%.
The Numbers
275,000: U.S. employers added 275,000 jobs in February.
3.9%: The unemployment rate rose to 3.9%.
4.3%: Wages rose 4.3% over the past year.
The Good
February’s jobs report outpaced expectations and even exceeded January’s adjusted gain of 229,000 jobs, marking the third straight month of seasonally adjusted gains over 200,000 and the 38th consecutive month of growth, as reported by the New York Times. While January’s numbers caused concerns among economists and investors that price pressures were resurfacing, the Labor Department made substantial changes to those numbers with the release of the February report, reducing those fears. Confidence is growing among investors as the U.S. economy continues to show resilience against the highest interest rates in over 20 years while delivering consistent job growth and some of the lowest unemployment rates in recent history. Another positive sign can be seen in labor force participation rates, which jumped to 83.5% for people in their prime working years—ages 25 to 54.
The Bad
Despite the headline job growth numbers exceeding expectations, experts are seeing signs of a gradual slowdown. The overall unemployment rate rose to 3.9%, the highest it’s been since January 2022, and wage growth slowed. The increase in unemployment from 3.7% in January was driven by people losing or leaving jobs as well as an increase in individuals entering the labor force. As reported by the Wall Street Journal, even though the index is elevated compared to prepandemic levels, the labor market is likely to cool off, with modest job gains expected through Q3 and Q4 of 2024.
The Unknown
The Federal Reserve is keeping an eye on the labor market as it contemplates potential changes to interest rates. Fed officials meet on March 19-20 and are expected to leave rates unchanged at that time. If job growth remains steady and the labor market is so strong that wages rise quickly, price increases are likely to persist as companies try to cover their costs. However, if the job market begins to slow significantly, the Fed may consider earlier interest rate cuts.
Conclusion
The February jobs report paints the picture of a labor market that is gradually downshifting with steady hiring and cooling wage growth increasing the likelihood that the U.S. will achieve a “soft landing” and bring inflation down without a recession. Moderate job and pay gains suggest the economy will continue to expand without the risk of reaccelerating inflation, giving the Federal Reserve the confidence they’re seeking to cut rates this year.
