US job growth slowed in February from the blistering pace of the previous month, but remained high enough to keep pressure on the Federal Reserve to consider returning to bigger rate hikes of interest.
The world’s largest economy added 311,000 jobs last month, more than the 225,000 jobs predicted by economists but less than the downwardly revised 504,000 in January. Over the past three months, monthly job gains have averaged 351,000.
Despite February’s gains, the jobless rate fell to 3.6%, still near a multi-decade low. The labor force participation rate, which tracks the proportion of Americans employed or looking for work, climbed to 62.5%.
Wage growth, meanwhile, rose 0.2% from January, slightly less than the previous monthly increase in average hourly earnings and weaker than expected. On an annual basis, it is 4.6% higher.
US stock futures climbed and Treasuries extended gains after the data was released. The subdued market reaction suggested that investors saw reason for optimism in the higher jobless figure and weaker-than-expected profit rise.
Treasury yields – which have been falling since Thursday on concerns over US banks – have fallen further as investors bet on a less aggressive Fed. The two-year yield, which moves with interest rate expectations, fell 0.16 percentage points to 4.73% and hit a two-week low.
Investor expectations that the Fed would return to higher interest rate hikes at its March meeting have fallen and now place roughly the same odds on a 0.5 or 0.25 percentage point increase .
The February report is one of the most important data releases ahead of the Fed’s next policy meeting on March 21-22. In testimony to Congress this week, central bank chairman Jay Powell said he would review the numbers — along with inflation and retail sales numbers, among others, due next week — in order to whether to resume more aggressive rate hikes after a deluge of surprisingly strong data.
“They are going to be very important in our assessment of the higher readings that we have received very recently and the general direction of the economy and our progress in reducing inflation,” he said on Wednesday, emphasizing that no decision had been made. yet been made. Powell added that “the ultimate level of interest rates will likely be higher than expected.”
In February, the Fed ended giant rate hikes and proceeded with a more traditional quarter-point hike, after repeatedly moving in half-point and three-quarter-point intervals. Last year. At the time, Powell justified the lower rate hike by arguing that it would “better enable” officials to monitor progress in their goal of controlling inflation and said the “disinflationary process” was underway.
But continued tightness in the labor market and renewed consumer vigor since then have upended expectations about the way forward for policy. Any idea that the January data overall was not timely will likely prompt the Fed to opt for a larger increase, economists warn.
In February, the recreation and hospitality sector recorded the strongest employment gains, with a gain of 105,000 jobs. Retail jobs increased by 50,000, while professional and business services jobs increased by 45,000.
Despite the hit to the housing and commercial real estate market from rising borrowing costs, the construction sector added 24,000 jobs.
Manufacturing, along with transportation and warehousing, were among the few sectors to register weak monthly growth or lose jobs.