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Wednesday, March 22, 2023

US job growth beats expectations in February

In February, the US economy saw a significant increase in the number of jobs, which should ensure the extension of the Federal Reserve to raise interest rates, although the pace of wage growth shows signs of slowing. .

Non-farm payrolls rose by 311,000 last month, according to a payroll report released Friday morning by the Department of Labor. Data for January has been revised down to show an addition of 504,000 instead of 517,000 previously reported.

Economists previously polled by Reuters forecast employment growth of 205,000 jobs. Experts say the economy needs to create 100,000 jobs a month to keep up with the growing working-age population.

The larger-than-expected increase in the number of new jobs suggests that January’s hiring surge was no accident.

Economists have argued that a variety of factors contributed to job growth in January, including unseasonably warm weather, annual benchmark data revisions and overly generous seasonal adjustment factors, a calculation model used by the government to remove seasonal fluctuations in the number of jobs from the net result. .data. The sharp increase in consumer spending in January can also be partly explained by seasonal factors.

Average hourly earnings rose 0.2% last month after rising 0.3% in January. That pushed wages up 4.6% year-on-year from 4.4% in January, partly because low numbers from last year were excluded from the calculations.

Federal Reserve Chairman Jerome Powell told lawmakers this week that the U.S. central bank is likely to raise rates more than expected. Prior to the release of the February jobs report, financial markets were pricing in a 50 basis point rate hike at the Fed’s March 21-22 meeting.

The Fed has raised the Bank Rate by 450 basis points since March of last year – from near zero to the current range of 4.50-4.75%.

The labor market remains in good shape, with initial jobless claims remaining very weak despite high-profile layoffs in the tech industry.

Data this week showed there were 1.9 job openings for every unemployed worker in January, while a Fed report said the labor market remained “stable” in February, with “reports of sporadic layoffs” and noting that “finding workers with the desired skills or experience remained a challenge.” Households’ perception of the job market last month was also fairly optimistic.

The unemployment rate fell from 3.4% in January to 3.6% in February, still the lowest unemployment rate since May 1969.

However, some economists caution against focusing too much on the narrow measure of unemployment and instead prefer the broader U-6 measure, which includes people who want to work but have given up looking and those working on time. partial because they cannot find a job. a full-time job.

The U-6 rate was 6.6% in January, meaning 10.9 million people were looking for work. At the same time, at the end of January, there were 10.8 million vacancies on the market. That means the labor market is in a balanced state, economists say.

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