The employment situation was closer to pre-pandemic levels in February as job growth picked up.
Nonfarm payrolls increased by 678,000 in the month, while the unemployment rate was 3.8% according to the Labor Department’s Bureau of Labor Statistics.
This compares to the estimates of 440,000 on payrolls, and 3.9% for unemployment.
As a sign that inflation may be slowing, wages rose only 1 cent/hour, which is 0.033%, in comparison to estimates of a 0.5% increase. As a result, the year-over-year growth was only 5.13%. This is well below the Dow Jones 5.8% estimate.
This report raised the number of Americans who are employed to levels that were previously possible in the general labor market. the Covid crisisAlthough still quite short at 1.14million, it is increasing. The labor shortages are still a significant obstacle for filling 10.9 million open jobs at the end 2021. It was a historic high gap with approximately 1.7 vacant positions per worker.
From an employment standpoint, it appears that February’s report confirmed the fact that the massive omicron spreading during winter did not have any impact.
Glassdoor senior economist Daniel Zhao stated that “this report shows that the market for jobs is healthy” and can withstand the fluctuations of the pandemic. “We have seen job growths of more than 400,000 over the last 10 months.”
Eric Merlis is Citizens Financial Group’s managing director for global markets. He stated, “The labor market rebound remains strong across all sectors as more Americans are returning work.” The U.S.’ economic recovery is still under threat from inflation and geopolitical problems. However, pandemic restrictions have been lifted and there has been strong job growth.
Markets, however, reacted little to the newsInvestors must remain concentrated the Russia-Ukraine war. Stocks dropped Friday, while government bond yields were much lower.
Like so many other times during the pandemic, the sector of leisure and hospitality saw job growth, with 179,000 added for the month. This sector was most affected by restrictions imposed by the government and has a 1.5 million job gap.
In the sector, the unemployment rate fell to 6.6%. This is down 1.6 percentage points compared to January but closer to February 2020’s 5.7%. In fact, wages fell by just 2 cents each hour to $19.35 Pay increases are likely to be slower due to increased hiring in bars, restaurants and hotels as well other similar businesses.
In terms of labor force participation, we are getting back to prepandemic levels. The job growth rate is strong and healthy. According to Kathy Jones (chief fixed income strategist, Charles Schwab), “So things are really great.” The level of wage increases should begin to fall as more people go back to work and participate in the workforce. The Fed is worried about inflation caused by more people earning more, which I think is good news.
Others sectors that saw strong growth included business and professional services (95,000), health care (64,000), and construction (60,000). Financial activities increased 36,000 while manufacturing contributed 36,000.
‘Real’ unemployment edges up
Previous months were subject to upward revisions. December’s figure rose 78,000 to 588,000. The January number was 481,000. These revisions combined added 92,000 to the previously reported average of 582,000 for the three months.
Labor force participation, which is closely monitored to gauge worker engagement, increased to 62.3%. This still represents 1.1 percentage points above the pre-pandemic February 2020 level. Another measure of unemployment, which includes those who are discouraged or have part-time work for economic reasons and sometimes called the “real” rate of unemployment, edged up to 7.2%.
After the winter surge in Covid omicron case numbers, which caused a significant human toll but left no imprint on employment, the trend is clear for job growth.
Nick Bunker, director of economic research at Indeed, said that “if more numbers like these are moving forward, then we can be optimistic about next year.” The rate of employment is increasing at an impressive pace and the number of jobless is approaching pre-pandemic levels. In these uncertain times we can’t take any thing for granted. However, if recovery continues at its current pace, many key indicators of labor market strength will reach pre-pandemic levels in this summer.
Pernicious inflation pressures have been raging at the highest level since early 1980s stagflation. According to the Labor Department, consumer prices rose at 7.5% in January. This number is likely to rise to close to 8.0% when next week’s report comes out.
Companies continue to hire, filling wide gaps left in the leisure- and hospitality sectors, along with many other pandemic affected industries.
The Federal Reserve closely monitors the number of jobs. The majority of monetary policymakers view the economy to be near full employment. This puts pressure on prices, which have skyrocketed amid shortages in supply and surges in demand related to the pandemic.
The Fed and Congress have pumped over $5 trillion of stimulus money into the economy, while they kept the benchmark borrowing rates near zero. Inflation is a result. Asset purchases are bringing in nearly $5 trillion.
Fed officials now expect to raise interest rates this month, and market expectation is that they will keep increasing throughout the year.
According to Michael Pearce (senior U.S. economist, Capital Economics), the February jobs report will give the Fed more confidence in its plan to tighten, but with wages now at an all-time low, officials are likely to feel less pressure to initiate a series of aggressive rate increases over the next months.
CME Group data indicates that traders continue to value the Fed’s March Fed meeting rate hike of 25 basis points and anticipate five additional such rates through the end.