A surprisingly strong gain of 242,000 net new jobs last month helped ease fears that the U.S. was skidding toward a recession, but a disappointing drop in average wages showed that the labor market is still a ways from fully healed.
The report released Friday by the Labor Department probably wasn’t strong enough to convince Federal Reserve policymakers to hike a key interest rate again this month after they enacted the first increase in nearly a decade in December, analysts said.
Still, most of February’s jobs data was upbeat. More than half a million discouraged workers jumped back into the improving jobs market, part of the best three-month labor force gain since 2000.
The unemployment rate held steady at 4.9%, matching an eight-year low. And a total of 30,000 more jobs was added to figures from December and January.
The upward revisions meant that even in the face of financial market turmoil and slowing global growth, the U.S. added an average of about 228,000 net jobs over the last three months. That was about the same solid pace of job creation as in 2015.
“These are not the job reports of which recessions are made,” Stuart Hoffman, chief economist at PNC Financial Services Group, said of the recent data. “Quite the contrary, these are job reports consistent with continued moderate economic growth.”
Investors were heartened by the latest jobs news. The Dow Jones industrial average increased 62.87 points, or 0.4%, to 17,006.77 on Friday. The broader Standard & Poor’s 500 index and tech-heavy Nasdaq saw similar gains.
Job gains were concentrated in four sectors: retail sales; leisure and hospitality; education and health services; and construction.
An initial estimate of just 151,000 net new jobs in January, on top of the worldwide problems and sharply slower U.S. economic growth in the fourth quarter, had led some economists to warn that the risk of a recession this year was rising.
New data from California highlighted those earlier worries.
The job engine of the nation’s largest state suddenly stalled in January. Employers shed 1,500 positions, the California Employment Development Department said Friday.
The state’s jobs data lags behind federal figures by a month.
The decline in California’s nonfarm payrolls was the first in 41/2 years, though it could be just an anomaly after strong growth of 47,700 jobs the previous month. For the year ended Jan. 31, California added 444,900 net new jobs.
The state’s unemployment rate declined to 5.7% in January from 5.9% the previous month, the report said. The last time it was lower was in September 2007.
The last time the national unemployment rate was lower also was in 2007. The rate held steady in February despite the job gains because the labor force grew by 555,000 people, the largest gain in more than a year.
The big jump last month pushed the percentage of Americans 16 years or older in the workforce up to 62.9%. It’s the highest labor force participation rate since January 2015, although it remains near its lowest levels since the late 1970s.
From December through February, the labor force swelled by 1.5 million people, or 1%. That’s the best growth since early 2000.
“Job seekers have become job holders,” said Patrick O’Keefe, economic research director at accounting and consulting firm CohnReznick. “The unemployment rate is declining for virtuous reasons,”
But the slowing world economy took its toll in some areas of the U.S. economy.
The mining industry shed 18,000 jobs because of lower oil prices. Manufacturers cut their payrolls by 16,000 as slow growth in key nations around the world and the rising value of the dollar reduced demand for U.S. products.
But the biggest downbeat note in the jobs report was that wages declined after a strong increase in January raised hopes that workers’ paychecks were finally starting to show significant gains.
Average hourly earnings declined 3 cents an hour to $25.35, the largest drop since 2014. Average hourly earnings had increased 12 cents in January.
The economy hasn’t been adding enough jobs to offset the growing labor force. That means employers don’t need to boost wages to lure and retain workers, said William Spriggs, chief economist at the AFL-CIO labor union.
“We’re seeing some solid growth, but it’s growth just fast enough to absorb the people who are entering the labor force,” he said.
For the 12 months that ended Feb. 29, wages have increased 2.2%, which is well above the low inflation rate but slower than the annual pace recorded in recent months.
An all-around strong jobs report would have increased pressure on Fed policymakers to nudge up a key interest rate when they meet March 15-16.
Such a move this month has been considered a long shot because of volatile financial markets and slowing global growth.
Fed policymakers have been concerned that inflation remains low. And the latest news on wages doesn’t help, said Ryan Wang, U.S. economist at HSBC.
“Until we see faster wage growth, I would not expect to see a broad-based pickup in inflation pressure,” he said.
Fed officials probably will want to watch global and financial economic developments, as well as U.S. data in the coming months, and could enact another small hike in June, Wang said.