US Economy Surpasses Expectations, Job Gains Remain Strong Despite Fed Rate Hikes
The US economy added 311,000 jobs in February, surpassing expectations and signaling a continued hot growth trend. However, the unemployment rate rose to 3.6%, above the expectation for 3.4%, amid a tick higher in the labor force participation rate to 62.5%, its highest level since March 2020. Average hourly earnings grew 0.2% month-on-month and were up 4.6% over the year before, however the monthly increase of 0.2% was below the 0.4% estimate.
Leisure and hospitality led employment gains with an increase of 105,000, about in line with the six-month average of 91,000. Retail saw a gain of 50,000, government added 46,000, and professional and business services saw an increase of 45,000. The month saw a decrease of 25,000 jobs in the information sector, as well as a loss of 22,000 jobs in transportation and warehousing.
The monthly job gains come on the heels of a surprisingly strong January jobs report in which 504,000 jobs were added to the economy. The average workweek ticked down to 34.5 hours from a revised 34.6 hours, signaling a “significant overall drop” in labor demand. This more aggressive rate hike was a modification of their former policy to slow the pace of rate hikes which was evident in the fact that after four consecutive rate hikes of ¾% last year in December the Fed reduced the magnitude of each rate hike just slightly to ½%.
The report shows the Fed is likely to continue to quickly raise interest rates, which will not be happy news for any consumer who is trying to borrow money soon. On March 22, the Federal Reserve’s Open Market Committee will announce its next move on interest rates. Powell informed the Senate Banking Committee this week that the Federal Reserve is ready to step up the rate of hikes, depending on how strong the job market is. Those trying to obtain a mortgage, automobile loan, or other forms of borrowing will continue to feel the negative impact of additional interest rate increases.
Overall, the labor market remains tight, with job creation decelerating in February but still stronger than expected despite Federal Reserve efforts to slow the economy and bring down inflation. Though wage growth has slowed with an annualized rate of 3.6%, this rate is still in line with the 3.5% wage growth Fed chair Jerome Powell has said is consistent with the 2% inflation target.
0. “U.S. economy adds 311000 jobs in February despite unemployment rate jump” CBS News, 11 Mar. 2023, https://www.cbsnews.com/video/u-s-economy-adds-311000-jobs-in-february-despite-unemployment-rate-jump/
1. “US economy added 311,000 jobs in February, exceeding expectations” NBC News, 10 Mar. 2023, https://www.nbcnews.com/business/business-news/payrolls-rose-311000-february-expected-jobs-growth-stays-hot-rcna74329
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