US Economy Adds 311K Jobs in February, Employment Participation Up, Wages Rise Slightly

The US economy added 311,000 jobs in February, outpacing expectations.^[0] The Bureau of Labor Statistics (BLS) released the jobs report on March 10, showing that the unemployment rate rose to 3.6%, above the expectation for 3.4%.^[1] This was due to an uptick in the labor force participation rate to 62.5%, its highest level since March 2020.^[2] Average hourly earnings rose just 0.24% for the month, a 4.6% year-over-year gain that was below the 4.8% estimate.^[2]

Leisure and hospitality led the job gains, adding 105,000 new positions, employment in retail rose by 50,000 and government jobs rose 46,000.^[3] The month-over-month increase in wages was 0.2%, the smallest growth observed since February 2022.^[3] In the month, there was a decrease of 25,000 jobs in information-related fields and 22,000 jobs in transportation and warehousing.^[4]

Economists and strategists were closely watching wages ahead of the report, with average hourly earnings rising 4.6% over the prior year in February, an increase from the 4.4% jump seen in January but slightly below forecasts for a 4.7% uptick in wages on an annual basis.^[2] As inflation rates began to decline towards the end of 2022, markets anticipated that the Federal Reserve would reduce the rate of their rate increases. Jerome Powell, the Federal Reserve Chairman, recently informed Congress that the recent data shows inflation is rising again. Powell believes that if this trend continues, interest rates will be higher than what was initially anticipated.

Over the past few months, large-scale firings have resulted in a reduced number of job opportunities in the IT field, particularly among American tech companies.^[5] Canadian wage growth picked up in February and surpassed 5 per cent, a potential setback for the Bank of Canada as it tries to subdue inflation and a rollicking labor market.^[6]

Following the release, stock performance was mixed, and Treasury yields were largely declining.^[7] Markets were expecting the Fed in turn to slow down the pace of its rate hikes, but Chairman Jerome Powell this week told Congress that recent metrics show inflation is back on the rise, and if that continues to be the case, he expects rates to rise to a higher level than previously expected. The Federal Reserve is paying close attention to increasing wages, which can lead to higher costs, particularly in service sectors that require a lot of labor.^[8]

0. “February's Jobs Report Brings More Confusing Economic News” TIME, 10 Mar. 2023, https://time.com/6261754/february-jobs-report

1. “U.S. adds 311k jobs in February but earnings slow, jobless rate rises By Investing.com” Investing.com, 10 Mar. 2023, https://www.investing.com/news/economic-indicators/us-adds-311k-jobs-in-february-but-earnings-slow-jobless-rate-rises-3027638

2. “Jobs report: US economy adds 311,000 jobs in February as labor market stays strong” Yahoo News, 10 Mar. 2023, https://news.yahoo.com/february-jobs-report-march-10-2023-124602371.html

3. “US hiring boom continued in February with 311,000 added jobs” The Guardian, 10 Mar. 2023, https://www.theguardian.com/business/2023/mar/10/us-jobs-report-february-2023

4. “Payrolls rose 311,000 in February, more than expected, showing solid growth” CNBC, 10 Mar. 2023, https://www.cnbc.com/2023/03/10/jobs-report-february-2023.html

5. “The leisure and hospitality industry is driving US job growth” Quartz, 9 Mar. 2023, https://qz.com/the-leisure-and-hospitality-industry-is-driving-us-job-1850202910

6. “Canadian wage growth jumps above 5% in tight labour market” The Globe and Mail, 10 Mar. 2023, https://www.theglobeandmail.com/business/article-canadian-wage-growth-jumps-above-5-in-tight-labour-market/

7. “Jobs Report: Soft Wage Growth Offsets Strong Hiring” Investor's Business Daily, 10 Mar. 2023, https://www.investors.com/news/economy/jobs-report-soft-wage-growth-offsets-strong-hiring-sp-500-futures-rise/

8. “The job market slowed last month, but it's still too hot to ease inflation fears” NPR, 10 Mar. 2023, https://www.npr.org/2023/03/10/1162054252/jobs-workers-labor-market-inflation-federal-reserve