The US economy exceeded expectations by creating more new jobs in February, although the unemployment rate saw a slight increase for the first time in four months. While this indicates some softening in the labor market, the overall job growth remains positive.
According to data released by the Bureau of Labor Statistics, the US labor market added 275,000 nonfarm payroll jobs in February, surpassing the economists’ expectation of 200,000 additions. However, the unemployment rate rose from 3.7% in January to 3.9% in February, marking its highest level in the past two years.
The report also revealed downward revisions to job growth in previous months. In January, a revised 229,000 jobs were added, down from the initially reported 353,000. Additionally, there were 167,000 fewer jobs added in December and January than previously expected.
Wage growth in February was slower than anticipated, with a 0.1% increase on a monthly basis compared to the expected 0.2%. This, along with the downward revisions in job gains, led economists to believe that the Federal Reserve will be less concerned about inflation driven by a strong labor market.
Capital Economics chief US economist Andrew Hunter stated in a note to clients, “Alongside the rise in the unemployment rate to a two-year high and a much weaker rise in wages, there is less reason now to be concerned that renewed labor market strength will drive inflation higher again.”
Despite these concerns, certain sectors experienced significant job growth. The healthcare industry added 67,000 jobs in February, making it the sector with the largest increase. Government employment also saw a notable rise with 52,000 jobs added.
Federal Reserve Chair Jerome Powell described the labor market as “relatively tight” during his testimony in front of lawmakers on Capitol Hill. He acknowledged that supply and demand conditions have been improving.
Market analysts are predicting that the first interest rate cut by the Federal Reserve will occur in June, with investors pricing in three to four rate cuts for the year.
Overall, while the US economy surpassed job expectations in February, the rise in the unemployment rate and slower wage growth indicate some softening in the labor market. However, certain sectors continue to show strong job growth, and the Federal Reserve remains cautiously optimistic about the overall state of the economy.
