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9 March 2018
Job creation in the US economy surged last month, but the annual rate of wage
growth slowed.
The economy created 313,000 jobs in February, official figures show, far in
excess of analysts' expectations.
However, the unemployment rate remained at 4.1%, while the annual earnings
growth rate slowed to 2.6% last month.
January's annual wage growth rate - which had triggered fears over inflationary
pressures - was also revised down from 2.9% to 2.8%.
The strong wage growth figure for January prompted sharp volatility on the
stock market, as investors worried the US Federal Reserve would quicken the
pace at which it increased interest rates.
'Firing on all cylinders'
Despite a lower-than-expected wage increase in February, many economists said
longer term trends still point to higher wages.
The US economy is in its ninth year of economic expansion, with an upswing in
global growth and tax cuts passed last year helping to boost growth.
Friday's report from the US Labor Department showed the biggest increase in
jobs since July 2016, sending major stock indexes higher.
The three major US stock indexes climbed almost 2% by the close of trading and
the Nasdaq closed at a record high.
The Dow Jones Industrial Average rose 440 points, or 1.77%, to end at 25,335,
the S&P 500 gained 47 points, or 1.74%, to 2,786 and the Nasdaq ended up 132
points, or 1.79%, to 7,560.
"We have an economy that is firing on all cylinders and the job market is a
reflection of that," said Gus Faucher, chief economist at PNC Bank.
February's gains included an increase of 61,000 construction jobs - the biggest
rise since 2007. The manufacturing sector also added 31,000 jobs, while retail
employment rebounded from declines last year.
The number of people working or looking for work also jumped by more than
800,000 last month. That was the biggest monthly rise in the labour force in
more than two decades and boosted the labour force participation rate to 63%.
Despite the rise, the unemployment rate held steady at 4.1%, where it has
hovered since October.
Those figures provided fodder for analysts who say wage growth could be
moderated by a large number of potential workers sitting on the sidelines.
"The huge gain in payrolls belies the notion that the [labour] market has truly
reached full employment," said Sophia Koropeckyj of Moody's Analytics.
Increasing participation by men of prime working age - between 25 and 54 years
- has helped drive the labour force participation rate higher in recent months,
reflecting a resurgence in sectors such as manufacturing.
But Ms Koropeckyj said she does not expect the labour force to continue growing
at last month's pace, pointing to challenges such as skill gaps and opioid
addiction.
Americans are also moving less, fuelling a geographic mismatch between jobs and
job seekers and hardening regional disparities.
"There's only so much of a boost you can get because a lot of people are
structurally unemployed," she said. "Certainly there is slack, but how much of
it will be practically absorbed is questionable."
Rate rise ahead?
Ms Koropeckyj said a tighter labour market makes slow acceleration in wage
growth "inevitable" this year.
The average hourly wage for private sector workers was $26.75 last month, up 68
cents from February 2017 and 4 cents from January.
Markets are expecting the Federal Reserve to raise interest rates at least
three times in 2018. But with the inflation rate lagging its target 2% rate, it
has been waiting for signs - like strong wage growth - of pricing pressure.
Analysts said strong hiring in February all but guarantees the Fed will raise
rates at its meeting later this month, even if the figures were boosted by mild
weather. But the relatively weak wage growth did little to resolve debates
about whether policymakers will eventually move faster.