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U.S. economy added 295,000 jobs in February

The U.S. Chamber of Commerce building. (Karen Bleier/AFP/Getty Images)

The nation added 295,000 jobs last month, according to government data released Friday morning, extending a labor market boom that is powering the U.S. economy.

The unemployment rate fell to 5.5 percent, a new post-recession low, though part of that stemmed from a shrinking workforce.

For 12 months in a row, the United States has added at least 200,000 jobs — a sustained pace of hiring unmatched since 1994 and 1995. The net job growth in February was above market expectations, despite a frigid winter in the Northeast.

The latest data “demonstrates the resilience and breadth of the current labor market recovery,” Scott Anderson, a chief economist at Bank of the West, said in an e-mailed analysis.

For the 12th month in a row, the nation added more than 200K jobs, extending a labor market boom that is powering the economy. (Video: Reuters)

Though the U.S. economy is still well short of a full-scale lift-off, the latest numbers underscore the way in which job growth, combined with an oil price dive, is driving a once-sluggish recovery. Americans have more jobs and more money to spend, all while cheaper energy is causing a drop in prices. That combination — which yields a virtuous cycle of greater demand and  labor expansion — leaves the United States well ahead of the listless advanced economies of Europe and Asia.

But the recovery is still a fragile one, particularly because wages have been flat for years and consumer spending could pull back if energy prices again climb.

Markets opened lower in Friday morning trading, with all three major indexes slightly down amid speculation that the Federal Reserve may increase interest rates by midyear.

The lack of wage growth has proven the biggest mystery of the economic upturn. Normally, a tighter labor market forces employers to compete for employees — and raise their pay. But so far, there has been no sign of upward pressure on wages, despite months of predictions that an improvement is just around the corner.

[Wal-Mart to raise pay for 500,000 workers]

Wage growth was modest in February, and average hourly earnings ticked up by 3 cents, to $24.78. In nominal terms, that’s a 2 percent improvement from one year ago. Wage growth has hung around that level, or slightly below, for much of the recovery. The flat wages are particularly troubling, because the economy is now adding high-paying, as well as low-paying, jobs. For food service workers and engineers alike, the raises are not coming.

“We’ve been thinking we would have seen [wage growth] by now,” said Sam Bullard, a senior economist at Wells Fargo Securities. “That is the one missing piece of the recovery.”

The unemployment rate is at a level where, historically, wages have pushed upward. But this time around there are millions on the margins. Some are stuck with part-time jobs because they can’t find full-time jobs. Others are part of the “shadow unemployed” — those who are too discouraged to even look for work and therefore are not counted in official unemployment numbers.

"I think there’s still some slack" in the labor market, Department of Labor Secretary Thomas E. Perez said Friday in an interview. "We’ve made some tremendous progress, but we have more work to do. America works best when we field a full team, and there’s still too much talent on the bench."

It’s unclear if those workers will again reenter the job market, and in February the civilian labor force actually shrank by about 180,000. There was also little change in the number of long-term unemployed.

Still, some companies are deciding to spend more to retain their workers. Wal-Mart last month announced that it was raising wages for roughly half a million of its lowest-paid employees. Retailers T.J. Maxx and Marshalls soon followed suit. Those wage increases will take effect in the coming months and were not reflected in the latest data, released by the Department of Labor.

“In my view, the balance of power is changing,” Frank Friedman, Deloitte’s interim chief executive, said in a telephone interview. “And it’s gone from a buyer’s market to a seller’s market. The buyer, of course, being companies. And now I’d say the employee has a lot more power.”

As part of the latest numbers, the Department of Labor revised downward its job growth estimate for January, from 257,000 positions to 239,000. Still, the United States has added 3.2 million private jobs over the last 12 months, the best figure since 1998.

In February, job growth was slightly less broad-based than in previous months. Employment in mining declined over the month, and manufacturing saw only modest gains. Meanwhile, the food and drinking services sector added 59,000 jobs, nearly double the monthly average established over the previous year. Growth in that industry indicates that consumers are spending savings at the pump on relatively smaller items, rather than on cars or washing machines.

In the latest quarter — October through December — consumer spending accounted for more economic growth than at any point since 2006, according to a separate batch of data released last week.

Year-on-year, domestic prices are down 0.2 percent, meaning the nation is seeing modest deflation. Take out energy and food, known for their price volatility, and prices are still up only 1.6 percent over the year — below the Federal Reserve’s 2 percent target.

[Fed survey finds U.S. economy growing at a moderate pace]

The low inflation rate shows an economy that still may have more slack than the labor numbers imply. Federal Reserve Chair Janet Yellen said last week that she would watch interest rates closely in determining when to raise rates, a step that could come as early as this summer. Yellen said the Fed is “reasonably confident” that inflation will gradually move back toward the target. Already, oil prices have climbed back up slightly from their nadir. The average U.S. gasoline price now stands at $2.47 a gallon; it was under $2 in January.