US employers are hiring at a solid pace
The US economy added 235,000 jobs in February, according to a jobs report published by the Bureau of Labor Statistics. That was well above market expectations of 190,000.
The unemployment rate, which is derived from a separate survey of US households, fell to 4.7 per cent from 4.8 per cent in January. The jobless rate is near what the Federal Reserve considers full employment, meaning that labour supply and demand in an economy are balanced at market wages, or in other words everyone who wants a job can get one, at least in theory.
Revisions to the previous two months added a total of 9,000 jobs to payrolls. December payrolls were revised down to a gain of 155,000 from 157,000. January’s growth was revised up from 227,000 to 238,000. Job growth over the past three months averaged 209,000 per month.
Labour market slack is declining. The number of people working part-time, but would prefer full-time positions, a measure known as part-time for economic reasons, dropped by 136,000 to 5.7 million. A broader measure of unemployment – which includes people working part-time for economic reasons and those who have given up looking for jobs – fell by 0.2 percentage point to 9.2 per cent. The so-called U-6 rate was 9.8 per cent a year earlier.
The labour force expanded as more people were pulled into the job market. The participation rate, which shows the share of working-age people in the labour force, increased to 63 per cent from 62.9 per cent in the previous month, the highest since last March. The rate has been hovering close to the lowest level in more than three decades.
A tightening job market is putting upward pressure on wage growth. Average hourly earnings rose 0.2 per cent on the previous month to 26.09 dollars. Wages were 2.8 per cent higher than a year ago, up from 2.6 per cent in January, matching Wall Street’s expectations and above the Fed’s preferred measure of price growth. The average workweek was unchanged, at 34.4 hours.
Job gains were boosted by construction companies, which created 58,000 jobs, the most in a decade. That figure was likely enhanced by unseasonably warm weather across much of the US. Professional and business services, the white-collar sector, added 37,000 jobs. Manufacturers hired 28,000 people, the most in more than two years, benefiting from rising demand from overseas markets. Meanwhile, retail positions fell by 26,000. Government employment rose by 8,000.
The February job growth report clears the path for the Federal Reserve to raise its benchmark interest rate by a quarter-point to a range of 0.75 per cent to 1 per cent, when it meets next week. The US central bank has forecast three quarter-point rate increases for this year.
Business and consumer confidence has risen since the presidential election, due in part to expectations that President Donald Trump’s mooted policies of tax cuts, infrastructure spending and deregulation would boost the economy, but growth remains subdued. GDP, a measure of goods and services produced across the economy, expanded at an annualised pace of 1.9 per cent in the fourth quarter.