By Geoffrey Smith
Investing.com — The U.S. economy continued to create jobs faster than most expected in February, but wage growth eased and the average worker’s working hours fell, suggesting that the labor market is indeed starting to cool.
The Labor Department said nonfarm payrolls rose by 311,000 through the middle of the month, well above the 205,000 consensus forecast, but down from a revised 507,000 in January. January’s numbers had been distorted upward by seasonal adjustments and other statistical quirks.
While the headline number was above forecasts, key elements of the survey pointed to a slight weakening of the labor market. Average hourly earnings growth slowed to 0.2%, rather than staying at 0.3% as expected, while the average number of hours worked edged down to 34.5 from 34.6.
Gilles Moec, chief economist with French asset management giant AXA, said that the report was consistent with the Fed raising the target range for fed funds by 25 basis points at its meeting in two weeks’ time, in as much as it had not borne out fears of inflationary pressures rising again.
“Fed’s hesitation is on the calibration of the next hike, not on whether or not it should hike, so today’s payroll is probably enough to keep them at 25 bps, unless we have a freak CPI next week,” Moec said. At the same time, he added, the labor market still remains too strong for the Fed to contemplate ending its hikes and contemplating any lowering of rates.
The unemployment rate rose to 3.6% from 3.4%, while the percentage of working-age adults in the active workforce reached its highest since the early days of the pandemic, inching up to 62.5% from 62.4%, Both of those indicators suggest a modest improvement in labor supply, which has been nowhere near the level needed to fill the vacancies created by the disruption of the pandemic.
U.S. stock futures turned positive after the release, which pointed again to a scenario resembling the Federal Reserve’s desired “soft landing” for the economy. While job growth was materially above expectations, the other elements of the report suggested that the labor market – while still hot – is cooling down a little rather than overheating.
“The overall story still seems to be one of slowly cooling wage growth,” said Daniel Zhao, chief economist at Glassdoor, via social media.