The U.S. economy posted the strongest job growth in seven months in February and the jobless rate fell to its lowest level since the pandemic, signs of a strong labor market ahead of a pivotal Reserve meeting federal.
Employers added 678,000 seasonally adjusted workers to their payrolls last month, the biggest increase since last July, the Labor Department said Friday. The jobless rate, derived from a separate household survey, fell to 3.8% from 4.0% a month earlier, approaching the pre-pandemic level of 3.5%.
Hourly wage gains, while still historically high, have declined from the previous month and are not keeping pace with inflation. Wages rose 5.1% in the year to February, down from the 5.5% gain the previous month.
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Friday’s report offers a snapshot of the labor market in mid-February, when the government surveyed households and businesses to produce the latest employment figures. That timing means the numbers don’t show what effect, if any, Russia’s invasion of Ukraine in late February and the subsequent spike in oil prices had on the labor market.
The latest data shows that the workforce has increased by 304,000 workers, a potential sign that the effects of the pandemic – such as people unable to work because they were sick or companies cutting their hours in reason of the virus – fade. About 4.2 million people said in February they were unable to work because their employer had closed or lost business due to the pandemic, up from 6 million the previous month.
Job growth has also been stronger in previous months than initially reported, the agency said. The economy added 481,000 jobs in January and 588,000 jobs in December in figures revised up by the Labor Department on Friday. Hospitality industries, including hotels, restaurants and resorts, led all sectors in hiring last month, accounting for a quarter of all new jobs. But the gains were broad-based, spanning office jobs, construction, healthcare and other sectors.
“Today’s jobs report helps bolster confidence in the resilience of the economic recovery, despite unexpected headwinds,” Daniel Zhao, senior economist at Glassdoor, said in a note to clients.
The report depicts a labor market that continues to strengthen almost exactly two years after the pandemic hit the United States. Mike Fratantoni, chief economist of the Mortgage Bankers Association, said this strengthens the case for the Fed to start raising interest rates when it meets in mid-2019. March. Fed Chairman Jerome Powell told a US House panel this week that he would propose a rate hike at the meeting.
“This report is likely to reaffirm recent comments from Federal Reserve officials that they still plan to raise rates at their upcoming March meeting, despite market volatility stemming from the situation in Ukraine,” it said. Mr. Fratantoni.
However, wage growth has slowed, a potential sign that the labor shortage is easing as more people enter the labor market. The average hourly wage of workers in the private sector rose by a penny from the previous month, the smallest gain in 13 months. In January, profits were up 19 cents. Meanwhile, the labor force participation rate – the share of people employed or looking for work – fell from 62.2% to 62.3%.
The decline in unemployment came from people who had been unemployed for a short time. The number of people unemployed for less than five weeks fell by 286,000, while those unemployed for six months or more remained stable.
“The labor market continues to be quite warm,” said Indeed economist Nick Bunker. “It looks like the labor market is still poised for strong job growth.”
While virus infections have fallen sharply since their peak in mid-January, employers say they continue to struggle to find workers as they react to a high level of household spending. Although some workers have pulled out in recent months, the labor force remains depleted, with many older workers retiring, immigration down sharply and some younger and middle-aged workers staying home.
With labor supply still tight, the labor market could approach – or perhaps reach or exceed – the level of employment that can persist without fueling higher inflation.
Inflation-adjusted gross domestic product eclipsed pre-pandemic levels last summer, but employment has not fully recovered.
The United States had 2.1 million, or 1.4%, or 1.4% fewer workers in January than in February 2020. Employers are hiring, but not as quickly as they would like. A labor shortage and rising wages are two of many factors contributing to inflation rising at the fastest pace in four decades.
Garn Development is desperate to hire housekeepers and other staff to run its 20 hotels in Utah and several other western states. Bookings at the family-owned hotels were up about 60% last year compared to 2020 and continue to rise this year, chief operating officer Gabe Garn said.
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But despite an average wage increase of 20% over the past year, the company is still understaffed, forcing hotel managers to clean rooms, serve food and perform other tasks normally reserved for lower-paid employees, Mr. Garn said. A large number of workers recently quit shortly after being hired, he said.
“Almost the second you don’t get the schedule you want, you leave and go get something else because everywhere there’s hiring,” Garn said. “Now when we interview, it’s almost like we’re selling ourselves versus how the employee is selling to us. Now you have to convince them that you are worthy of them rather than the other way around.
The labor market poses a dilemma for the Fed. With inflation at 7.5% in February, well above the central bank’s 2% target, the Fed plans to raise interest rates several times this year to avoid overheating the economy. But policymakers want to do so at a pace modest enough to allow job growth to continue.
The unemployment rate reached a post-World War II peak of 14.7% in April 2020. Since then, and particularly over the past six months, it has fallen sharply, rapidly approaching the pre-pandemic level of 3 .5%, which was a 50 -year low. In December, the Fed forecast long-term unemployment at 4%.
The proportion of workers leaving their jobs remains close to the highest on record since the end of 2000, as does the number of job vacancies.
Three changes could lead to stronger job growth this spring, economists said. The first is the continued decline in virus cases. The second is the decision by some states and cities in recent days like Washington, New York, California and Hawaii to lift rules that required customers to get vaccinated and wear masks. The third is a potential decline in household savings, which could cause people to join the workforce to collect a paycheck, especially when inflation rises and the stock market falters.
Write to Josh Mitchell at [email protected]
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