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Job Growth Remains Strong in February

Unemployment picks up, wages slow

Health care worker hired

U.S. employers added 275,000 new jobs in February, continuing the country’s historic labor market expansion, according to the latest employment report from the U.S. Bureau of Labor Statistics (BLS). Hiring was robust across sectors, the unemployment rate rose from 3.7 percent to 3.9 percent and wage gains slowed, reflecting falling inflation.

“Job growth blew past expectations—again,” said Andrew Flowers, lead labor economist at Appcast. But take the headline growth number from February’s report with a grain of salt, he said. “If recent history is a guide, it may get revised back down to the 200,000 or so that forecasters had expected.” 

December and January new job totals were reduced from initial estimates by 167,000 jobs, due to “additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors,” the BLS said.

Noah Yosif, chief economist at the American Staffing Association, said that the report suggests a healthy labor market that is softening due to increased pressure from interest rates and tightening economic conditions. “Significant downward revisions to employment estimates in prior months reinforce that view,” he said.

Economists have been predicting for months that the jobs market would cool, and for months they have been wrong, said Glassdoor Chief Economist Aaron Terrazas. February is a repeat of that, he said.

“The February jobs report came in with strong overall payroll gains, but the unemployment rate also moved sharply higher,” he said. “After a string of exceptionally strong labor market reports that threatened to derail an expected easing of monetary policy over the months ahead, today’s data will be a warning flag for anyone concerned that there is still too much inflationary pressure across the U.S. economy to merit lower interest rates.”

Julia Pollak, chief economist at ZipRecruiter, noted signs of a gradual cooldown in effect. “The report is also consistent with data from the JOLTS report earlier this week showing that rates of hiring and quits are below pre-pandemic rates.”

The mixed viewpoints are also reflected in other labor market reports that show job creation has stayed strong despite a spate of high-profile layoffs, particularly in the tech industry. On the other hand, there are nearly 9 million job openings, outnumbering the unemployed by 1.4 to 1 and unemployment benefits claims are consistently low.

Federal Reserve officials have also expressed mixed signals, indicating that inflation is cooling but not by enough to warrant interest rate cuts.

“The Federal Reserve should be content with this report, as not only is employment holding up but wage growth is slowing down,” said Nick Bunker, economic research director for North America at the Indeed Hiring Lab. “After a few months of headfakes, it looks like the labor market is returning to last year’s familiar moderating trend.”

Employment growth is expected to cool further this year compared with 2023—when monthly gains averaged over 254,000 jobs. Over the past 12 months, the U.S. economy has added an average of 230,000 jobs a month.

Industry Breakdown

Not only did payroll growth remain robust, but the gains are spread through the labor market, with almost two-thirds of sectors adding jobs last month, Bunker said.

Health care led with 67,000 new jobs. Other sizable gains were reported in government (52,000), restaurants and bars (42,000), construction (23,000), transportation and warehousing (20,000) and retail (19,000).

“We’re seeing demand in sectors that experienced growth last month, particularly in health care, and anticipate industries including accounting and hospitality to be hot in coming months as tax season ramps up and spring travel comes into play,” said Amy Glaser, senior vice president at Adecco.

Ger Doyle, ManpowerGroup senior vice president and head of Experis North America, one of the largest recruiters of tech talent in the U.S., said that nurses, software developers and front-line retail workers are the three most sought after roles today.

“In the tech space, AI and machine learning engineers are seeing good growth since last year, with finance and consulting companies as some of the top employers of this specialist tech talent,” he said. “More broadly, American consumers are still watching their wallets and cost-conscious retail employers like Kroger, Walmart and Amazon are the top companies hiring this month.”

Terrazas pointed out that “Restaurants and bars saw unseasonably large payroll gains after three months of effectively flat employment, in spite of recent minimum wage increases that many feared would be a headwind to job growth in the sector.”

Pollak said that another puzzling figure in the report was the net loss of 4,000 jobs in manufacturing. “Despite massive public investments in domestic manufacturing construction since the pandemic, manufacturing employment has been flat as a pancake for the past 18 months,” she said. “The tech sector employment figures were also weak and suggest that the ‘techcession’ is still not behind us.”

Yosif noted that seasonally adjusted temporary jobs declined by 15,400 in February.

Unemployment Rises

The number of unemployed people increased in February by 334,000 to 6.5 million. “The highest unemployment rate since January 2022, layoffs and a softening hiring market for highly skilled workers drove much of the increase,” Terrazas said.

Unemployment ranged from 3.4 percent to 3.8 percent during 2023 and has stayed under 4 percent for the last 25 months.

“While the unemployment rate rose two-tenths, it remains historically low,” Flowers said.

“Prime-age labor force participation rose strongly, to 83.5 percent, the highest point in over 20 years. And layoffs remain low, so an important driver of the higher unemployment rate is the expanding workforce, which is good news for recruiters.” 

It should be noted that job creation skewed toward part-time roles. Full-time jobs decreased by 187,000 while part-time employment rose by 51,000, according to the employment survey. An alternative jobless measure that includes discouraged workers and those holding part-time jobs for economic reasons rose slightly to 7.3 percent.

“The rise in unemployment appears to have been driven by movements on the periphery, as the prime-age employment-to-population ratio stays on the rise and job losses remain low,” Bunker said. “The rate at which currently unemployed workers are finding new work does appear to be slowing but remains generally robust.”

Additional details are also encouraging, Bunker said. “The employment-to-population ratio for workers ages 25 to 54 increased in February and is now reversing the decline we saw near the end of last year. A similar story is true for participation rates for these prime-age workers, particularly women. After flagging somewhat towards the end of last year, the participation rate for prime-age women jumped for the second straight month, an encouraging return of momentum for a key group that has led the way throughout the recovery.”

Wages Cool

Average hourly earnings, watched closely as an inflation indicator, showed a deceleration from a year ago. Wages rose just 0.1 percent on the month, and were up 4.3 percent from a year ago, down from the 4.5 percent gain in January.

“The wage growth figure was good news for workers, who saw 25 straight months of real wage declines in 2021 and 2022 when inflation skyrocketed but have now seen real wage growth return since May 2023,” Pollak said. 

She added that the strong wage growth number—which is well above the latest year-over-year consumer price index inflation rate of 3.1 percent, is not necessarily bad news for employers.

“That is because productivity growth has been so strong lately,” she said.


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