Job Growth in U.S. Picks Up, Tops Forecasts
Jobs grew at a healthy clip in February, the government reported Friday, helping boost wages to their highest year-over-year increase in more than four years while encouraging more jobless people to reenter the labor force.
The stronger-than-predicted net increase of 243,000 jobs was the largest gain in any of the last 12 months except for November, when the economy was rebounding from the effects of Hurricane Katrina.
It compared with revised increases of 170,000 jobs in January and 145,000 in December, the Labor Department reported. The consensus of economic forecasters was for a net gain of 210,000 positions for February.
As more unemployed people sought work, the jobless rate rose to 4.8% in February from a 4 1/2 -year low of 4.7% in January.
“The U.S. labor market is strong but not booming,” said David Kelly, economic advisor for Putnam Investments in Boston. Many economists said the latest report reinforced their predictions that the Federal Reserve would raise its benchmark short-term interest rate in two more quarter-point increments to 5%. But they said the report also provided new reasons to stop there.
“There is no justification for the Fed to push its benchmark rate beyond 5%,” said Bernard Baumohl, executive director of the Economic Outlook Group in Princeton, N.J. He pointed to strong growth in worker productivity and a weakening housing sector as forces that would make still-higher interest rates unnecessary as anti-inflation measures.
Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pa., said the job report added to evidence that the economy was growing at an annual rate of more than 4% in the first quarter, higher than its historical average.
Two more Fed interest-rate hikes could temper the economy’s growth rate and prevent a new round of inflation, while keeping the unemployment rate at or below 5%, Zandi said.
The report signaled that wage growth, which has lagged behind inflation even as the unemployment rate has tumbled, might finally be making a comeback.
Average hourly wages of production or nonsupervisory workers increased by a nickel to $16.47 an hour, the Labor Department said. Because hours worked fell slightly, average weekly earnings were basically unchanged at $555.04.
For the last 12 months, both measures rose by 3.5%. The year-over-year increase in hourly pay was the highest since September 2001.
Jared Bernstein, senior economist with the labor-oriented Economic Policy Institute in Washington, said higher wages should not spark fears of rising inflation.
“The growth in most workers’ wages is probably just about to catch up with inflation, resulting in the first inflation-adjusted wage gains in years,” he said.
Consumer prices rose 4% in the 12 months ended in January.
Yet polls show most Americans remain dissatisfied with the economy. Kelly of Putnam Investments said people were dissatisfied because the job rebound had passed many people by.
The most obvious gap, he said, is in the manufacturing sector. It lost 1,000 jobs in February while all other sectors were gaining, and lost 48,000 workers in the last 12 months. The sector now accounts for barely one job in 10 in the United States.
The Northeast and Midwest have seen relatively slow job growth, Kelly said. Michigan has lost jobs since the national job boom began in mid-2003, and Maine, Massachusetts and Ohio have grown by less than 1%.
And less-well-educated workers have fared poorly. Since mid-2003, Kelly said, overall per-capita personal income has grown 12.6%, but the average hourly earnings of production workers and nonsupervisory personnel has risen only 6.6%.
Six months after Katrina devastated New Orleans, it still took a toll, the Labor Department report showed. The 300,000 people in the labor force who had been forced from their homes by the storm but had since gone back showed an unemployment rate of 4.8% -- exactly the national average. But another 300,000 had still not returned, and their unemployment rate was 22.6%.
Administration officials and congressional Republicans read the report as a vindication of their tax cuts.
“Today’s solid employment number is a vivid reminder that our economy is off to a strong start in 2006,” Commerce Secretary Carlos M. Gutierrez said in a statement. “Our policies are working.”
“If there were an Oscar for the strongest economic policy, I think we’d be a contender,” Rep. Deborah Pryce of Ohio said in a conference call of House Republican leaders with reporters.
House Majority Whip Roy Blunt of Missouri said this Congress, which has seen jobs grow by 2.4 million, could be the biggest job-growth Congress of recent years by the time the new Congress is installed next January. At the current rate of growth, jobs would increase by 4.3 million during these two years. But that would still be fewer than during any of the four Congresses during the Clinton administration, when tax rates were rising, not falling.