Job creation slowed in February but was still stronger than expected despite the Federal Reserve’s efforts to slow the economy and reduce inflation.
The Labor Department reported on Friday that non-farm payrolls increased by 311,000 in the month. This was higher than the Dow Jones estimate of 225,000 and a sign that the job market is still hot.
The unemployment rate rose to 3.6%, above expectations of 3.4%.
There was some good news regarding inflation, with average hourly earnings up 4.6% from a year ago, below estimates of 4.8%. The monthly increase of 0.2% was also lower than the 0.4% estimate.
Although the jobs number was stronger than expected, February’s growth marked a slowdown from the unusually strong month of January. The year opened with non-farm payroll gains of 504,000, a total that was revised down only slightly from the 517,000 at the start. The December total was also reduced slightly, to 239,000, a decrease of 21,000 from the previous estimate.
Stocks were mixed After the release, while Treasury yields were mostly low.
The leisure and hospitality sector led the gains, with an increase of 105,000, in line with the six-month average of 91,000. Retail saw a gain of 50,000, the government added 46,000, and professional and commercial services saw an increase of 45,000.
Information-related jobs fell by 25,000, while transportation and warehousing lost 22,000 jobs in the month.
The jobs report comes at a critical time for the US economy, and by extension, for federal policymakers.
Over the past year, the central bank has raised the benchmark interest rate eight times, bringing the Fed rate up to a range of 4.5%-4.75%.
With inflation data sluggish at the end of 2024, markets expected the Fed to in turn slow the pace of interest rate hikes. That happened in February, when the Federal Open Market Committee approved a 0.25 percentage point increase and indicated that small increases would also be in the future.
However, Federal Reserve Chairman Jerome Powell told Congress this week that recent measures show that inflation is back on the rise, and if that continues, he expects rates to rise to a level higher than previously expected. Powell specifically cited the “very tight” job market as the reason prices are likely to continue to rise and stay high.
He also noted that the increases could be higher than the increase in February.
Although Powell confirmed that no decision had been made regarding the March FOMC meeting, the markets relented in his comments. Stocks sold off sharply, and the gap widened between 2- and 10-year Treasury yields, a phenomenon known as the inverted yield curve that preceded all of the post-World War II recessions.