United States: Payrolls post largest gain in over a year and a half in February
March 9, 2018
Results from the February jobs report continued to reflect robust labor market conditions, with non-farm payrolls rising 313,000 in February—the largest gain since July 2016. The print largely exceeded the 205,000 new jobs expected by market analysts and the 239,000 jobs created in January, a figure that was revised up 39,000 from last month’s report.
Healthy gains were recorded across the board, particularly in the goods-producing sector, in which 100,000 new jobs were created in February following the 72,000 jobs added in January. The construction sector performed notably well, with payrolls up 61,000 in February (January: +40,000). In addition, the manufacturing sector added a solid 31,000 new employees (January: +25,000). Service industries kept up the strong pace from the previous month, with retail trade adding 50,300 workers in February (January: +14,800), offsetting weaker hiring dynamics in education and health services.
The unemployment rate held steady at a 17-year low of 4.1% for the fifth consecutive month in February, coming in above the 4.0% that analysts had expected. February’s steady figure reflected strong payroll gains being counterbalanced by a hefty increase in the labor force, with the labor force participation rate climbing to 63.0%, the highest since September 2017, from 62.7% in January. Meanwhile, average hourly earnings inched up 0.1% from the previous month, down from the 0.3% gain recorded in January and below market expectations of a 0.2% increase. On an annual basis, wage growth came in at 2.6%, down from January’s revised 2.8% increase (previously reported: +2.9% year-on-year).
February’s employment report showed that, while the pace of hiring remained strong, wage pressures lost some steam in the month, following stronger-than-expected compensation growth in January. Nonetheless, given the exceedingly tight labor market and increased demand for workers among firms, it is widely expected that Federal Reserve officials will hike interest rates at their upcoming FOMC meeting on March 20–21, while solidifying market expectations that they will remain on track for three rate increases this year. If the momentum observed in the labor market continues, the Fed could deliver a fourth interest rate hike this year in a bid to cool demand.
Author: Javier Colato, Economist