Better Than Expected Jobs Report
The economy created 678,000 new jobs last month, the biggest monthly gain since July, according to last Friday’s jobs report posted by the Labor Department’s Bureau of Labor Statistics (BLS). The unemployment rate is down to 3.8%.
From all perspectives, everyone can agree that this was a great jobs report boasting strong jobs growth. Compared to estimates of 440,000 new jobs and a 3.9% unemployment rate, the February jobs report exceeded expectations.
Tight Labor Market Returns
Within low single digits of levels before the Covid crisis, the labor market is back! Returning to a tight labor market, the economy has recovered 90% of the country’s jobs pre-pandemic.
While some people have retired during the past two years and others continue to have child care challenges, the jobs report also showed that people are returning to the labor market, which market watchers have been waiting for. The labor force participation rate rose to 62.3%, only 1.1 percentage points from the pre-pandemic level in February 2020.
The “real” unemployment rate, an alternative measure of unemployment, which includes discouraged workers and those holding part-time positions for economic reasons, edged higher to 7.2%. In January, 6.0 million people reported to the BLS that they were unable to work at all or worked few hours at some point in the four weeks preceding the survey due to the pandemic. In February, that number dropped to 4.2 million.
Labor Shortage Leads to Job Changes
Last year, a record number 47 million people changed jobs. The turnover rate is going to be remarkable this year, as well, if this level keeps up. A sign of a labor shortage, the turnover rate is going to continue until something in the economy fundamentally changes.
As always, leisure and hospitality led the job gains with 179,000 jobs added for the month. Professional and business services and health care came in second for job gains with 95,000 and 64,000 jobs added respectively. Of the professional and business services growth, 36,000 positions were in temporary help services.
Upward Revisions for December and January
Adding 92,000 more jobs than previously recorded, upward revisions brought December jobs up to 588,000, an increase of 78,000 from the previous estimate while January jobs increased to 481,000. The two months added 92,000 more jobs than previously recorded, bringing the three-month average to 582,000.
Wage Growth Slows
While the year-over-year wage increase was 5.13%, wages were only up 1 cent an hour, or 0.03% last month, which could be a sign that inflation is slowing. Because the average hourly wage growth on a yearly basis would have been unsustainable, the low growth during the last month is welcome news to the Federal Reserve.
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