Yet wage growth moderates after early-year scare about inflation
The numbers: The U.S. added 313,000 new jobs in February, the biggest increase in a year and a half and more evidence of an economy firing on all cylinders.
The increase in hiring easily blew past the 222,000 forecast of economists polled by MarketWatch. Job gains in January and December were also much stronger than initially reported.
Despite the big increase in hiring, wage growth moderated. Hourly pay rose 4 cents to $26.75 an hour, but the yearly increase in wages tapered off. The 12-month increase in pay slipped to 2.6% from a revised 2.8% in January.
Still, the strong report makes it a virtual lock that the Federal Reserve will increase interest rates when senior officials meet this month.
The unemployment rate was unchanged at a 17-year low of 4.1%.
What happened: Warmer weather helped to boost hiring almost across the board in February after a harsh spell in January briefly kept thousands of people at home.
Construction companies hired 61,000 people to mark the biggest increase in 11 years. Retailers added 50,000 jobs. Professional and business jobs also increased by 50,000. And manufacturers filled 31,000 positions.
Workers also put more time in on the job. The average employee worked 34.5 hours in February, reversing a weather-induced decline in the first month of the year.
What’s more, the economy added 54,000 more jobs in January and December than previously reported. Altogether, the economy has gained an average of 242,000 new jobs in the past three months. That’s much stronger than the 182,000 monthly average in 2017.
Yet even as the unemployment rate falls and firms complain more loudly about a shortage of skilled workers, they still aren’t really laying out the red carpet for new or old employees.
The amount a worker earns per hour has been rising gradually in the past few years, but wage gains still trail the 3% to 4% annual increases that typically prevail at the height of an economic boom.
Big picture: The modest growth in wages in February is likely to tamp down, at least for awhile, Wall Street worries about rising pay leading to higher inflation. A surge in pay in January helped ignite a route in U.S. stock markets and send interest rates higher.
Wages are almost certain to keep going up, however, especially if the economy keeps adding jobs at its current torrid pace. The question is, how fast and how much?
The current U.S. expansion will soon turn nine years old and it shows little sign of slowing down. Sales are rising, many firms are eager to fill open jobs and the biggest business tax breaks in more than 30 years are adding more fuel to the fire.
What could extinguish some of the optimism is the White House’s sharp turn toward protectionist measures such as the newly enacted steel tariffs. The tariffs will raise costs for many American manufacturers such as automakers and invite retaliation from other countries that could disrupt the U.S. economy.
The Fed, for its part, has been gradually raising the cost of borrowing to make sure the economy doesn’t overheat and spur a bout of inflation. That’s another potential worry.