The economy added 311,000 jobs in February, beating expectations, according to the latest jobs report from Bureau of Labor Statistics (BLS).
February’s job growth was led by gains in leisure and hospitality, retail trade, government and healthcare industries. However, employment declined in the information, transportation and warehousing industries.
Job growth last month brought the unemployment rate to 3.6%, slightly higher than the 3.4% recorded for January. The month closed with 5.9 million unemployed people, a boost from 5.7 million the month before. Average hourly earnings rose to $33.09, an increase of eight cents. Over the last 12 months, average hourly earnings have risen by 4.6%.
The latest jobs report comes days after Federal Reserve Chair Jerome Powell said the central bank may increase its expected interest rate hikes in the face of a strong economy and high inflation. An aggressive interest rate spike by the Fed can have effects on the costs of products like mortgages and credit cards.
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The Federal Reserve has hinted at continuing to raise interest rates this year and even at a higher pace in order to bring inflation to its 2% target range.
Inflation rose by 6.4% in January, as measured by the latest Consumer Price Index (CPI). And at its latest meeting which ended in February, the Fed increased interest rates by 25 basis points, a slowdown from previous raises. However, the Fed may soon return to higher interest rate boosts.
“If the market was looking for a clear datapoint that would allow the Fed to ease back toward a 25 bps hike at its upcoming meeting, today’s report was not it,” Morning Consult Economic Analyst Jesse Wheeler said. “The U.S economy added 311,000 jobs in February, far exceeding expectations. While unemployment ticked higher and wage growth cooled a bit, wages are still rising at a level which Chair Powell has repeatedly deemed inconsistent with the Fed’s 2% inflation target.”
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While the Fed’s move to raise interest rates may slow down spending and cool inflation, some economists believe it can also push the nation into recession.
“Economic downturn is likely in the U.S. as most economic indicators currently point to a deceleration at the minimum and/or probable contraction,” First National Bank of Omaha (FNBO) said in its 2023 Outlook report. “Aggressive Fed monetary tightening and higher interest rates may negatively impact economic growth.”
But despite recession fears, some experts believe the Fed is close to meeting its goal. FNBO projects that inflation will drop below 5%, based in part by the Fed’s tightening of monetary policy.
“The possibility of a recession looms heavy, with expectations hovering on today’s jobs report and Tuesday’s inflation data,” Realtor.com Economic Research Analyst Hannah Jones said in a statement. “A still-hot economy would imply more aggressive Fed actions, which would increase the likelihood of a not-so-soft landing for the economy. Today’s employment data suggests that January’s red-hot data was a blip, rather than a trend, and that the Fed’s policies are beginning to slow the economy.
“The target level of inflation is still a ways off, which means that elevated housing costs are likely here to stay for the remainder of the year,” Jones added. “However, an overall healthy job market means that homeowners and potential buyers are in a solid position to weigh their housing options as the spring market picks up.”
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