The economy churned out 311,000 jobs in February, reflecting impressive labor market strength more than a year into the Federal Reserve’s fight to cool the economy.
The February job gains came in lower than the previous month’s eye-popping numbers, but beat economists’ predictions, reflecting ongoing resilience in the labor market. That strength has been fueled by surging consumer demand in a variety of industries, especially leisure and hospitality and health care.
“The entire labor market is cooling off. But it’s still incredibly tight,” said Luke Tilley, chief economist at wealth manager Wilmington Trust. “It’s just not as tight as it was in the middle of last year or in 2021.”
Meanwhile, the White House praised Friday’s news. In a speech, President Biden said that the report meant his “economic plan is working,” two years after the passage of his $1.9 trillion covid relief package, the American Rescue Plan.
“Overall, we’ve created more jobs in two years than any administration has created in the first four years,” Biden said. “[The American Rescue Plan] led to the fastest recovery of any major economy in the world. It laid the foundation for the progress we see today.”
The stock market slipped on Friday’s news, with investors uncertain about how the new jobs data would play into the Fed’s plan for raising interest rates. All three major indexes fell in the morning and wavered into midday.
For months, the labor market has shown signs of cooling, as demand for workers has gradually declined, with some exceptions. There were 10.8 million job openings in January, a small decrease from December, the Labor Department reported Wednesday. Layoffs in January rose to a high not seen since December 2020, in part reflecting the high-profile job cuts that have swept across the tech, advertising and media industries in recent months. Disney, Zoom, Yahoo and Rupert Murdoch’s News Corp. all announced mass layoffs in February.
Economists said January’s shocking job growth, revised down to 504,000, might have been skewed by seasonal adjustments, as employers in this tight labor market hoarded workers more than usual coming out of the holidays.
Wage growth continues to moderate. Average hourly wages rose by 0.2 percent between January and February, a slower pace than much of last year. Overall pay is up 4.6 percent from a year ago, to an hourly average of $33.09 an hour.
“Even if wages are moderating down, they are still really quite strong but more consistent with what the Federal Reserve is looking for [to tame inflation],” said Nick Bunker, economic research director at the jobs site Indeed.
However, the Fed could use the labor market’s overall strength to justify raising interest rates at a more aggressive pace than outlined just months ago, which Fed Chair Jerome H. Powell talked about while testifying before Congress earlier this week. Economists say that raising interest rates increases the likelihood of a recession later in the year.
“Looking at this jobs report, I don’t think there was a clear signal for the Fed that said, ‘Oh, we can ease off [interest rate hikes],’” said Jesse Wheeler, an economic analyst at decision intelligence company Morning Consult.
Inflation has fallen since reaching 40-year highs last summer, but prices remain well above normal. A new inflation report to be released next week will provide more clarity on whether the Fed has made enough progress to continue slowing interest rate hikes.
The strength of the labor market continues to be propped up by booming consumer demand for services and experiences, such as dining out and travel, coming out of the pandemic.
Industries that have mushroomed coming out of pandemic shutdowns continued to grow in February. Leisure and hospitality added 105,000 jobs, with strong gains in food services, bars and accommodations, accounting for about a third of all job gains in February. However, employment in the industry is still about 410,000 jobs fewer than before the pandemic.
Retail added 50,000 jobs, fueled by gains from general merchandise sellers, including Walmart. Government also continued to expand, adding 46,000 jobs, mostly in local government. And health care added 44,000 jobs, reflecting growing demand from an aging population.
The construction sector continued to expand, adding 24,000 jobs, despite the Fed’s interest rate hikes that have made buying houses more costly.
Meanwhile, employers in industries that boomed during the pandemic lockdowns tended to do less well. Employment fell in the information, transportation and warehousing sectors.
The labor force participation rate edged up slightly in February to 62.5 percent, likely to have contributed to the uptick in unemployment. That rate has been slowly trending up, but it’s still below levels predating the pandemic, which drew millions out of the workforce.
Still, more prime-age workers, those between 25 and 54, are now back in the labor force than before the pandemic.
“When the president took office two years ago, he was very clear to us about getting people back to work,” said Labor Secretary Marty Walsh on Friday, his last day in the position before leaving the administration. “This report shows that the president’s agenda is working. People are earning more money, and they’re back to work.”
Despite the robust labor market, many workers are still struggling to make ends meet with prices that are growing at a faster clip than wages. The rising costs of basic necessities such as housing, gas and food are contributing to inflation.
Eduardo Romero, 60, an Uber driver in Los Angeles, said that lately, he often has spent more than 50 hours a week driving for the company to take home around $1,000. He used to work about 40 hours a week, when he first started driving in 2017, but that’s no longer enough to afford basic necessities for him and his wife.
“The price of eggs and beans is so high right now,” Romero said. “I want to retire, but I’ve told my wife that I will have to work until I’m 70 to have enough to live on.”
Hiring has eased some for employers grappling with labor shortages, but the leisure and hospitality industry is an area where workers have unusual leverage. Employers are still struggling to attract workers and many people have left the industry for new careers.
Steven Majkrzak, the owner of five restaurant franchises in the Fargo, N.D., metro area, said he has had to recalibrate his entire employment model to attract workers, including offering signing bonuses, adding new tipping options, hiring younger workers and raising wages by $7 an hour in some positions.
Still, one of his restaurants is operating with only 25 to 30 workers instead of the normal 45 to 50. The unemployment rate in North Dakota was 2.1 percent as of December, one of the nation’s lowest.
“The 18-to-26 age range has really almost disappeared from our workforce in North Dakota,” Majkrzak said. “Our strategy has shifted to hiring people outside of that demographic. We’ve resorted to hiring people as young as 14.”