U.S. job growth slowed in February from the blistering pace of the previous month, but remained high enough to keep pressure on the Federal Reserve to consider switching back to bigger rate hikes.
The world’s largest economy added 311,000 jobs last month, higher than the 225,000 jobs economists had forecast, but less than January’s downwardly revised 504,000 jobs. Over the past three months, monthly job gains have averaged 351,000.
Despite February’s gains, the unemployment rate rose to 3.6 percent, still near a multi-decade low. The labor force participation rate, which tracks the share of Americans who are either employed or looking for work, rose to 62.5 percent.
Wage growth, meanwhile, rose 0.2 percent from January, just shy of the previous monthly increase in average hourly earnings and lower than expected. On an annual basis, it is higher by 4.6 per cent.
US stock futures rose and Treasuries extended their gains after the data release. The muted market reaction suggested that investors saw reasons for optimism in the higher unemployment rate and in the smaller-than-expected increase in earnings.
Treasury yields – which have been falling since yesterday amid panic over US banks – fell further as investors bet on a less aggressive Fed. The two-year interest rate, which follows interest rate expectations, fell 0.16 percentage points to 4.73 per cent. and hit a two-week low.
Investors lowered expectations that the Fed would accelerate the pace of rate hikes at its March meeting and now place roughly even odds on a 0.5 or 0.25 percentage point increase.
February’s report is one of the most consistent data releases ahead of the Fed’s next policy meeting on March 21-22. March. In congressional testimony this week, Jay Powell, chairman of the central bank, said it would examine the numbers — along with inflation and retail sales figures expected next week, among other things — to determine whether to resume more aggressive rate hikes after a deluge of unexpectedly strong data.
“They will be very important in our assessment of the higher readings that we received very recently and of the overall direction of the economy and of our progress in bringing inflation down,” he said on Wednesday, stressing that there was no any decision. yet made. Powell added that “the ultimate level of interest rates is likely to be higher than previously expected”.
In February, the Fed called time on jumbo rate hikes, delivering a more traditional quarter-point increase after repeatedly moving in half- and three-quarter increments last year. At the time, Powell justified the smaller rate hike by arguing that it would “better allow” officials to track progress in their goal of taming inflation and said the “disinflationary process” was underway.
But continued tightness in the labor market and renewed consumer strength since then have raised expectations about the way forward for politics. Any hint that January’s data as a whole was not a one-off is likely to prompt the Fed to opt for the bigger hike, economists warn.
In February, the leisure and hospitality sector saw the largest employment gain, with job growth of 105,000. Retail jobs grew by 50,000 positions, while professional and business services jobs increased by 45,000.
Despite housing and commercial property markets being hit by rising borrowing costs, the construction sector added 24,000 jobs.
Manufacturing as well as transport and warehousing were among the few sectors that had registered small monthly growth or had outright job losses.