US jobs up strongly, setting up Fed to raise US rates next week
US employers added jobs at an above-average pace for a second month on outsized gains in construction and manufacturing while wage growth picked up, as the labour market continued its steady improvement in the new year.
The 235,000 increase followed a 238,000 rise in January that was more than previously estimated, the best back-to-back rise since July, a Labour Department report showed Friday in Washington. The unemployment rate fell to 4.7 per cent, and wages grew 2.8 per cent from February 2016.
While unseasonably warm weather may have boosted the payrolls count, the data represent President Donald Trump’s first full month in office and coincide with a surge in economic optimism following his election victory. The figures also validate recent comments by Federal Reserve officials that flagged a likely interest-rate increase this month.
“We’re getting closer and closer to full employment,” said Ryan Sweet, an economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “Wages had been the one sore spot in the labour market data, and I think that’s coming through here. With inflation accelerating I think we’re going to start to see even stronger wage growth down the road.”
The prospect of a Fed rate increase at its meeting next week is “pretty much a slam dunk,” he said.
Trump, via a post on his Twitter account in a retweet of a Drudge Report headline, seized on the report: “GREAT AGAIN: +235,000”.
Private employment, which excludes government agencies, rose by 227,000 after a 221,000 increase the prior month. It was the biggest gain since July. Construction jobs, which can fluctuate depending on the weather, rose by 58,000, the strongest in almost a decade, and followed a 40,000 increase in January. Manufacturing payrolls gained 28,000, the most since August 2013. Meanwhile, retail positions fell by 26,000, the most in four years.
Last month was the second-warmest February on record in the contiguous 48 US states, with an average temperature of 41 degrees Fahrenheit (5 degrees Celsius), about 7 degrees higher than the 20th century average, according to the National Oceanic and Atmospheric Administration.
Just 157,000 people were unable to work in February because of inclement weather, compared with an average of 311,000 for the month, according to the Labour Department. In January, 395,000 employees couldn’t work because of the weather.
Even so, the figures indicate that the drivers of consumer spending probably remain intact after purchases slowed in January, suggesting that any easing of first-quarter economic growth will be temporary. Fed Chair Janet Yellen said last week that the labour market is “in the vicinity of our maximum employment objective.”
At the same time, payroll gains are forecast to slow, owing to factors including employers’ difficulty filling positions and tepid growth in the working-age population. For the full year, economists project an average monthly increase of 171,000 jobs, according to a February survey.
Trump has set a goal of adding 25 million jobs over 10 years, which would require additions of 208,000 a month, or 2.5 million positions a year.
“We’re probably not going to get 200,000-plus jobs in the next couple of months,” said Sweet of Moody’s. “Favourable weather probably pulled up some hiring, particularly in construction.”
The participation rate, which shows the share of working-age people in the labour force, increased to 63 per cent, the highest since last March, from 62.9 per cent. It has been hovering close to the lowest level in more than three decades.
The number of people out of the labour force, a figure repeatedly highlighted by Trump as a sign of economic malaise, fell by 176,000 to 94.2 million.
Average hourly earnings rose by 0.2 per cent from the previous month. January’s year-over-year increase was revised up to a 2.6 per cent gain. The average work week for all workers was unchanged at 34.4 hours.