US Adds 687K Jobs in February, Far Exceeding Expectations

by TK Sanders
(Photo by Tim Boyle/Getty Images)

The February jobs report showed signs of increased wage gains and a much-strengthened labor market as much of the country shifts out of the COVID pandemic. The report, released this morning, will help the Federal Reserve determine whether to raise interest rates at the upcoming meeting in mid-March.

The central bank is widely expected to raise interest rates at that meeting. The Fed has not raised rates since 2018. Dow Jones economists expected job growth around 440,000 — slightly less than the 467,000 created in January following the surge in the omicron COVID variant. Economists also expected unemployment to fall to 3.9 percent. All of these contributing factors help market makers and investors take a pulse of the economy and drive decision-making on a national scale.

“The labor market is tightening pretty fast, and there’s no end in sight to strong wage growth,” said Ethan Harris, head of global economics at Bank of America. “It’s still going to be a very tight labor market; and our guess is wage inflation stays close to 6 percent throughout the year.” For comparison, wage growth grew 5.68 percent year-over-year in January.

What Did the February Jobs Report Say?

The actual numbers surpassed expectations in a big way. Non-farm payrolls for the month grew by a whopping 678,000 and the unemployment rate dipped to 3.8 percent, the Labor Department’s Bureau of Labor Statistics reported Friday. Both numbers outperformed economists’ expectations. The jobs report outperformed economists’ expectations by over 50 percent.

The Fed’s self-proclaimed dual mandate combines full employment and price stabilization. The central bank is clearly exceeding its goal on employment; but battling sharp inflation that outpaces wage growth is another story. Interest rate hikes are all-but-guaranteed after job numbers like todays. The first of those hikes is expected to be a quarter-point increase in March and then as many as six more over the course of this year.

“For the Fed, this just keeps them on track,” Harris reiterated.

How Are Certain Industries Faring?

Economists said job growth would come from a broad range of industries, and they were right. Leisure and hospitality both reported gains, as did the medical industry. Some industries continue to lag, however.

“The supply chain issues are still an issue impeding manufacturing but less so particularly in the vehicle sector. They do seem to be getting their production schedules back up,” said Mark Zandi, chief economist at Moody’s Analytics. “Construction seems more problematic. There’s a record number of homes in the pipeline. They just can’t seem to get anything across the finish line.” Zandi also said the industry suffers from parts and labor shortages.

Tom Simons, money market economist at Jefferies, said he is most interested in wage gains.

“It is a big deal in terms of just trying to conceptualize how well the consumer can keep up with inflation,” said Simons. “The labor market is so tight, and there’s still pent-up demand for various things. It seems reasonable that wages will continue to climb as employers compete to secure workers.”