U.S. gains a healthy 235,000 jobs in February; unemployment rate falls to 4.7%
Warm weather and rising business optimism helped the U.S. economy to create another burst of job growth last month, giving President Trump an early confidence boost and all but assuring that the Federal Reserve will nudge up interest rates next week.
Employers added 235,000 jobs in February, about as many as in January and well above analysts’ expectations and the average monthly payroll growth for all of last year, the Labor Department said Friday,
The unemployment rate dipped back down to 4.7%, just a notch above its decade low. The labor force expanded as more people were pulled into the job market. And there were fresh indications that worker earnings are increasing at a slightly faster clip than a year ago. Just about the only sour note last month were job losses in retail trade.
“The strength of the labor market is for real,” said Jack Ablin, chief investment officer at BMO Private Bank in Chicago. “From a financial point of view, it’s a great state of affairs. We’re creating more jobs, we’re expanding, and it isn’t being coupled with inflation.”
Friday’s report was the first major employment gauge capturing an entire month with Trump as president, and administration officials were so eager to link the unexpectedly strong showing to Trump that White House Press Secretary Sean Spicer broke an obscure federal rule by publicly touting the news within the first hour of the report’s release.
Within two hours of Spicer’s tweet, Tom Perez, former President Obama’s Labor secretary and new chairman of the Democratic National Committee, followed with a statement of his own: “Thanks, Obama! Trump has had about as much to do with job growth since January 20th as he does with the Washington Wizards’ winning record: absolutely nothing.”
During the presidential campaign, Trump often had dismissed government data on employment as inaccurate and politically manipulated. When a reporter asked Friday whether Trump stood by his remarks that the data were “phony,” Spicer had a ready answer — and used words that he said were the president’s.
“They may have been phony in the past, but it’s very real now,” Spicer said.
Trump inherited a solid job market that has long outperformed the slow-growing economy. Even so, surveys show companies in manufacturing and other industries, including small firms, have become more confident about the outlook since late last year, at least in part because of hopes that tax cuts and other favorable policies will be coming from the new Trump administration and his party that controls Congress. Analysts say that optimism played some role in the robust hiring.
So likely did the unseasonably mild winter. While California was getting drenched last month, much of the rest of the country was coasting through this winter without major weather disruptions. Labor Department statisticians adjust employment data for seasonality, so theoretically weather variances should have been factored out, but in practice, extreme conditions can still distort the final numbers.
That’s probably what happened with the construction figures. Residential and commercial construction employers combined added a whopping 58,000 jobs last month, bringing the industry’s net payroll growth in the first two months to 98,000 — compared to 155,000 for all of last year.
But that also means that February’s job gains probably overstate the underlying strength of the labor market, and there could be payback in the coming months with somewhat slower hiring in the spring.
“This is not a sustainable pace, for sure,” said Sophia Koropeckyj, a labor economist at Moody’s Analytics in West Chester, Pa. She added that Moody’s was projecting job growth this year to average about 180,000 a month.
Even at that pace, the American job market would be doing remarkably well given that the economic recovery from the Great Recession is nearing its eight birthday in July. The nation has generated 77 straight months of job gains totaling more than 15 million. And the unemployment rate has been below 5% for 10 straight months, in a range that some economists see as full employment.
Job growth depends partly on the supply of available workers, and by the conventional jobless-rate measure, employers should be scraping the bottom of the barrel. But millions of workers dropped out of the labor market during the last downturn, and many have remained on the sidelines, discouraged by the slow recovery and uncertain prospects to land good jobs.
In February, the labor participation rate rose for the third straight month, and the share of the working-age population who reported working last month reached 60%, the highest since February 2009 when the country was in recession.
It remains to be seen how many more people will be returning to the job market and how much employers will bid up wages to entice them. Worker pay has not kept pace with the strong corporate profits or demand for labor, but momentum seems to be on labor’s side.
Hourly wages for all private-sector workers, on average, rose six cents last month, nothing exciting but still a little quicker than the prior month and up 2.8% from February of last year. The annual wage increases had been around 2% through most of the past few years.
“It is saying that workers are beginning to share the gains in the economy,” said Edward Leamer, professor of management, economics and statistics at UCLA. “We’re starting to see workers have some market power.”
If wages continue to climb faster, as economists expect, that would give a further push to inflation. Consumer prices have been growing at a very low rate for several years but recently have been creeping higher. Inflation is now approaching the Fed’s 2% target.
Leamer thinks that the pickup in hourly earnings will be a major factor in the Fed’s expected move to raise interest rates. Other analysts believe the Fed is acting partly to cool high-flying financial markets, which have reached record levels this year. Stocks rose moderately Friday after the jobs report.
Whatever the reason, it’s now almost a sure bet that the central bank will announce a rate increase next Wednesday. Even before Friday’s jobs report, Fed Chair Janet L. Yellen had signaled that policymakers were poised to lift the benchmark interest rate by a quarter point, to a range of 0.75% to 1%. That would be the Fed’s third rate increase since the recovery began in 2009.
“It would take something unforeseen, some sort of crisis, to derail those plans,” said Greg McBride, chief financial analyst at Bankrate.com.
McBride said a quarter-point hike would be felt fairly quickly by consumers with home-equity loans and credit cards, as lenders pass on the higher interest rate directly to customers within the next month or two after the Fed action. The average annual interest rate on credit cards is 16.26%, he said.
The single rate hike won’t mean much for savers. There have been two Fed rate increases since December 2015, and the average interest rate paid for savings accounts remains barely above 0.1%, McBride said.
“It’s not going to be anything close to the 1-for-1 between the Fed hike and what savers see.”
Times staff writer Michael A. Memoli in Washington, D.C., contributed to this report.
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1:35 p.m.: This article was updated with additional reaction and analysis.
6:05 a.m.: This article was updated with staff reporting
This article was originally published at 5:30 a.m.