February’s jobs report from the U.S. Bureau of Labor Statistics offered an interesting snapshot of the evolving employment picture, with nonfarm employers adding 275,000 new jobs while the unemployment rate rose to a two-year high.
Employment momentum is clearly falling, as job additions haven’t surpassed 300,000 since May of last year. But February’s gain remains a solid one, especially considering consensus expectations. A Reuters poll of economists, for example, forecast additions at 200,000, making February the fourth consecutive month that hiring has exceeded economist expectations.
Gains were broad-based among industries, with health care leading the way. That sector added 67,000 jobs in February, topping its average monthly gain of 58,000 over the past year. Government employment also saw a large bump, growing by 52,000, while food and drink establishments added 42,000 jobs. No sectors reported major, notable losses, though modest reductions were seen in manufacturing.
The jobless rate, however, still rose despite the unexpected hiring increase. After holding steady a 3.7% for three straight months, the unemployment rate climbed 0.2 percentage points to 3.9% in February. The uptick underscored the divergence between how job gains and joblessness are reported; job additions are derived from an establishment survey, which polls roughly 119,000 workplaces, while the unemployment rate is determined via a different, smaller survey of approximately 60,000 households. Notably, February’s survey actually revealed a drop of 184,000 jobs, hence the growth in the jobless rate.
Average hourly earnings, meanwhile, rose 0.1%, a smaller-than-expected increase after wages were up 0.5% in January. The downshift brought the annual earnings increase to 4.3% — still healthy, but down from 4.4% one month prior.
The total mixed picture presents a curious case for Fed watchers trying to decipher how the central bank is swayed, if at all, by February’s jobs data.
“All signs point to a slowly cooling, but strong, labor market,” said Ksenia Potapov, economist at First American Financial Corp. “When the FOMC convenes later this month, they will issue new guidance and projections for economic conditions. This jobs report is unlikely to materially change the Fed’s expectations for economic conditions and any potential interest rate moves.
“The Fed expects rate cuts later this year, but wants to see more evidence that inflation is slowing. For the housing market, this suggests the boost from lower mortgage rates likely won’t materialize until well after the traditional spring homebuying season begins.”
