Salem Radio Network News Tuesday, March 21, 2023


US reports strong job growth in February; wage gains slow

By Lucia Mutikani

WASHINGTON (Reuters) – The U.S. economy added jobs at a brisk clip in February, but monthly wage growth slowed and the unemployment rate rose, pointing to some labor market loosening and prompting financial markets to dial back expectations that the Federal Reserve would raise interest rates by half a percentage point this month.

The Labor Department’s closely watched employment report on Friday was published days after Fed Chair Jerome Powell told lawmakers the U.S. central bank would likely need to raise rates more than expected. Before Friday’s report, financial markets had priced in a 50-basis-point rate hike at the Fed’s March 21-22 policy meeting, according to CME Group’s FedWatch tool.

They now see a quarter-percentage-point rate hike as the most likely outcome, though much will depend on February’s consumer price report due next week.

“The jobs report suggests the economy has a little more momentum than previously thought and companies are still keen on hiring, which is not what the Fed wants to hear,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. “However, given the other weaker offsets in the overall report, the decision to hike rates by 50 basis points instead of 25 basis points will likely come down to next week’s CPI release.”

Nonfarm payrolls increased by 311,000 jobs last month, the Labor Department reported. Data for January was revised lower to show 504,000 jobs added instead of the previously reported 517,000.

Economists polled by Reuters had forecast job growth of 205,000. They say the economy needs to create 100,000 jobs per month to keep up with growth in the working-age population.

Estimates for the gain in February payrolls ranged from as low as 78,000 to as high as 325,000.

Graphic: -Payroll growth remains strong

The larger-than-expected increase in payrolls suggested that January’s surge in hiring was not a fluke.

Economists had argued that job growth in January was flattered by a host of factors, including unseasonably warm weather, annual benchmark revisions to the data as well as overly generous seasonal adjustment factors, the model the government uses to strip out seasonal fluctuations from the data. Robust consumer spending growth in January was also partially attributed to seasonal factors.

The leisure and hospitality sector led the rise in employment last month, adding 105,000 jobs. Restaurants and bars accounted for the bulk of the increase. Employment in leisure and hospitality remains 410,000 jobs below its pre-pandemic level.

Retailers hired just over 50,000 more workers, while government payrolls increased by 46,000 jobs. Employment in professional and business services rose by 45,000 jobs and healthcare added 44,000 positions. Construction payrolls grew by 24,000 jobs, but manufacturing employment dropped 4,000.

The information industry shed 25,000 jobs, while transportation and warehousing lost about 22,000 positions.

Graphic: Jobs by industry

Average hourly earnings rose 0.2% last month after gaining 0.3% in January. That raised the year-on-year increase in wages to 4.6% from 4.4% in January, partly due to last year’s low readings dropping out of the calculation.

U.S. stocks were trading lower. The dollar fell against a basket of currencies. U.S. Treasury prices rose.


The Fed has increased its policy rate by 450 basis points since last March from the near-zero level to the current 4.50%-4.75% range. Economists expect the central bank to raise interest rates into the summer.

The labor market has remained tight, with first-time applications for unemployment benefits staying extremely low despite high-profile layoffs in the technology industry.

Data this week showed there were 1.9 job openings for every unemployed person in January, while the Fed’s “Beige Book” report described the labor market as remaining “solid” in February, and noted “scattered reports of layoffs” and that “finding workers with desired skills or experience remained challenging.” Households’ perceptions of the labor market were also quite upbeat last month.

The unemployment rate rose to 3.6% in February from 3.4% in January, which was the lowest since May 1969. The increase occurred as 419,000 people entered the labor force, lifting the participation rate to 62.5% from 62.4% in January.

Graphic: Frequency of unemployment rates

Some economists, however, cautioned against placing too much emphasis on the narrow jobless rate gauge, and instead favored a broader measure of unemployment, which includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment.

This so-called U-6 unemployment measure was at 6.6% in January, meaning there were 10.9 million people available to work, more than the 10.8 million job openings at the end of January, which would suggest the labor market was in balance.

This broader measure of unemployment rose to 6.8% in February.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci, Chizu Nomiyama and Paul Simao)


Editorial Cartoons

View More »

Steve Breen
Sun, Mar 19, 2023