U.S. employers hired workers at the strongest pace in a year and a half and the unemployment rate held at a 17-year low in February, but the pace of wage growth eased.
Nonfarm payrolls rose a seasonally adjusted 313,000 last month, the Labor Department said. It was the strongest monthly gain since July 2016. The unemployment rate, 4.1%, held at the lowest level since December 2000 for the fifth straight month. But wages grew at a slower rate compared with January.
Economists surveyed by The Wall Street Journal had expected 205,000 new jobs and a 4.0% unemployment rate.
Construction firms added 61000 workers, the biggest increase in nearly 11 years for the sector. Hiring also picked up at retailers, manufacturers and local governments, including schools. All levels of government added 26000 workers, also the best gain since July 2016.
Better hiring was supported by Americans entering the workforce in larger numbers. The share of Americans participating in the labour force rose by 0.3 percentage point to 63.0 % in February.
U.S. employers have added to payrolls for 89 straight months, extending the longest continuous jobs expansion on record.
Revised figures show employers added 239000 jobs in January and 175000 in December, a net upward revision of 54000. The pace of hiring has picked up recently. Hiring in the first two months of 2018 is outpacing 2017’s average monthly growth of 182,000. That runs counter to economists’ expectation for hiring to broadly ease as the labour market tightens.
A tighter labour market should also produce better wage growth. But, last month, wages grew at a slower rate compared with January.
Average hourly earnings for all private sector workers increased U.S. 4 cents last month to USD 26.75. Wages rose 2.6 % from a year earlier in February. The annual wage gain in January was revised down to 2.8 % increase.
January’s initial estimated gain—showing the best gain since the recession ended—stoked concerns in financial markets that bigger paychecks could lead to higher inflation and cause the Federal Reserve to act more aggressively to lift interest rates. That move would be intended to prevent the economy from overheating, but could have a depressing effect on stock prices.
Fed officials meet later this month and are widely expected to lift the central bank’s benchmark interest rate. The data released on March 9, 2018 is unlikely to change that path. The bigger question hanging over markets is whether the Fed will raise the rate this year more than the three times policy makers signalled in December.
The last time unemployment was as low, in late 2000, wages were rising at a much faster pace.
“I would have expected to see more increases in wages, and frankly I do expect to see more increases in wages in the next year or so,” Fed Chairman Jerome Powell told members of Congress last week.
The average workweek rose by 0.1 hour to 34.5 hours in February.
The labour market remains a bright spot in the economy, as it has for most of the economic expansion that began in mid-2009.
More broadly, the economy appears to be slowing so far this year after a nine-month stretch to end 2017 featured some of the best growth in a decade. Consumer spending eased early this year, financial markets have become more volatile and economists are expecting the pace of economic growth to slow in the first quarter to near the lackluster 2 % rate that has been a hallmark of the long, but unspectacular expansion. Still economists expect tax cuts, which are putting more money in consumers’ pockets and intended to incentivize business investment, to support growth later this year.
A broad measure of unemployment and underemployment that includes Americans stuck in part-time jobs or too discouraged to look for work held steady at 8.2 %.
That rate, known as the U-6, remains somewhat elevated compared with the last time the headline rate touched 4 %. In December 2000, the broader measure was 6.9 %.