U.S. employers added 311,000 jobs in February, a slowdown from the previous month’s blockbuster but a robust gain that could lead the Federal Reserve to accelerate the pace of interest rate hikes to fight inflation.
The jobless rate rose from a 54-year low of 3.4% to 3.6%, the Labor Department said Friday.
Economists polled by Bloomberg had forecast 225,000 job creations.
Citing January’s half-million salary advances and a resurgence in inflation, Fed Chairman Jerome Powell told Congress this week that officials would likely raise interest rates more than expected and could once again accelerate the pace of increases. The Fed meets on March 21 and 22.
Powell suggested that Friday’s jobs report and new inflation data next week would be key to setting the Fed’s course over the next few months. His remarks sparked this week’s stock market sell-off and stoked fears that aggressive rate hikes could trigger a recession this year.
Most economists estimated that hiring fell last month. Nancy Vanden Houten of Oxford Economics said January’s blistering job growth was amplified by unusually warm weather, particularly in sectors such as restaurants, hotels and construction. Although favorable weather conditions also boosted employment in February, it probably wasn’t a major factor, she says.
January’s gains were also bolstered by pandemic-related quirks in the way Labor adjusted its numbers to account for seasonal fluctuations over the holidays – a bump that likely reversed last month, economists say. .
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Is there still a labor shortage?
Meanwhile, Goldman Sachs said the payroll additions in February were likely due to ongoing worker shortages that led many employers to push back hiring to the spring so as not to be caught off guard.
Other employment measures pointed to a pullback in hiring last month. Homebase, which provides payroll software to small businesses, said corporate job growth had slowed significantly and the number of hours worked had fallen.
Will the labor market slow down in 2023?
Generally, payroll growth is expected to slow significantly this year after the United States added 4.8 million jobs last year, just behind the 7.3 million gained in 2021 as the country recovering from the pandemic.
Now, however, the nation has recovered the 22 million jobs lost by the health crisis. And inflation and the Fed’s interest rate hike are also expected to reduce employment gains. Moody’s Analytics predicts just 856,000 new jobs this year, while Oxford Economics and Barclays predict hundreds of thousands of job losses.
Tech companies have laid off nearly 300,000 workers since the start of 2022, according to layoffs.fyibut job cuts have remained historically low, at least based on the level of initial jobless claims.
Many companies are reluctant to lay off because of labor shortages, says Oxford economist Ryan Sweet.