Friday, March 4, 2022
The U.S. economy added 678,000 jobs in February and this strong report exceeded consensus forecast of 423,000. The unemployment rate fell to 3.8 percent from 4 percent in January, edging closer to pre pandemic levels. In February 2020, the unemployment rate was 3.5 percent.
The survey period for this report closed before Russia invaded Ukraine so no geopolitical impacts are in these data.
February jobs gains were broad based but mainly in the services sector as pandemic effects wane. Restaurants alone added 124,000 and the return to schooling pushed education jobs up by 112,000. Professional and business services added 95,000 jobs.
The participation rate is 62.3 percent, still 1.1 percentage points below February 2020. Participation rates are still lower than before the pandemic as individuals with young children may struggle to find childcare. The composition of the labor force is also changing as some baby boomers are taking early retirements.
In February, 13 percent worked remotely because of the pandemic, down from 15.4 percent last month. This percentage will likely continue to decline as more offices across the country loosen restrictions.
Another encouraging sign is the decline in people unable to work because of COVID-19-related business declines, either from closed or lost business. In February, 4.2 million reported inability to work because of business disruptions, down from 6 million last month.
“The February jobs numbers are encouraging but overall, this does not change expectations for how the FOMC will set interest rates at the next meeting. The big conundrum for policy makers right now is how to relieve inflation fatigue yet still protect the economy from geopolitical stress,” said LPL Financial Chief Economist Jeffrey Roach.
Wage growth is slowing. February average hourly earnings were unchanged from January and up 5.1 percent from a year ago. Looking ahead, wages may begin to moderate as the labor market loosens. Participation rates should continue to increase to pre-pandemic levels by the end of this year.
As shown in the LPL Chart of the Day, February posted one of the strongest reports in the last 12 months. The reopening process is supporting the services sector and hiring in services industries like leisure and hospitality strongly contributed to the headline gain in employment. This latest release from the Bureau of Labor Statistics will not likely change the minds of the FOMC in the upcoming meeting. Chairman Powell already revealed his preference for a 25 basis point hike in rates and this is the most likely action.
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