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U.S. job gains crush experts' expectations


The U.S. economy added 313,000 jobs in February and the unemployment rate remained at a historically low level of 4.1 percent for the fifth consecutive month, the U.S. Department of Labor reported.

The gains easily beat the expectations of economists, who were expecting roughly 200,000 job additions, on par with January’s gains.

jobgain“I am not one for superlatives, but it is a really positive report for the economy and the housing market,” said Fannie Mae Deputy Chief Economist Mark Palim during a telephone interview.

Sectors adding thousands of jobs in February included professional and business services (up 50,000), retail (up 50,000), manufacturing (31,000 jobs added), financial services (up 28,000), health care (19,000 new jobs) and mining (up 9,000).

The construction industry was among the biggest gainers, adding 61,000 jobs, which included 38,000 jobs in the specialty trades.  

The Labor Department also revised upward its estimated job gains for December and January by an additional 54,000 jobs in total. Over the past three months, the economy has added an average of 242,000 jobs each month. The labor-participation rate jumped up 30 basis points over the month, to 63 percent, but remains roughly the same as it was a year earlier.

“The labor market is continuing to respond to growth,” Palim said. “We are getting the additional workers in the labor market, including for construction. Secondly, we wanted to see what the trend in wage increases is, and that was good news too. There is still some moderation there in the rate of growth.”

Hourly wage growth increased just 4 cents, to $26.75, following a 7 cent gain in January. Hourly wages have increased by 2.6 percent year over year as of February.

Palim said a sharp spike in wages could prompt the Federal Reserve to clamp down more aggressively on the economy. The modest increase in wages reflected in the February report, however, should keep the Fed on a cautious course of three quarter-percent increases to the short-term federal funds rate this year, including one in March, Palim said.  

Palim noted that the economy is not behaving in the same way it did in the 1980s, when wages and inflation rose rapidly after unemployment fell below 6 percent.

“From a textbook point of view, it is a bit of a puzzle,” Palim said. “You would have thought by now that wages and inflation would be increasing, but we haven’t seen it yet.”   

The strong job gains assures regular rate increases from the Fed and ultimately higher mortgage rates, National Association of Realtors Chief Economist Lawrence Yun said.

“That in itself hurts housing affordability,” Yun said. “But factors that can help with affordability are more income to household — possibly a second income earner getting a job — and if home prices can finally moderate.”

Yun said home price growth would begin to ease if home construction ramps up and more new homes are built. 


 

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