Blog
Labor Market Beats Expectations Again, but Signs of Cooling Emerge
March 9, 2024
The U.S. labor market remained red hot in February as job creation numbers crushed expectations, but cooling wage growth and climbing unemployment point to a slowdown. The mixed report is welcome news for the Federal Reserve’s attempts to achieve a soft landing for the economy.
U.S. employers added 275,000 jobs last month, far above the 198,000 that economists polled by Dow Jones had been expecting. The month’s strong numbers were tempered somewhat by some sizable downward revisions to previous months’ figures. January’s blockbuster initially reported number of 353,000 was revised down to 229,000. December’s previously reported 330,000 was cut to 290,000. All told, the two months’ totals are 167,000 lower than initially reported.
The unemployment rate ticked up to 3.9% in February from 3.7% in January, a higher-than-expected but still modest increase. The Labor Department uses household surveys to calculate the unemployment rate, and the survey showed a decline of 184,000 employed Americans.
Despite the increase in the unemployment rate, the workforce participation rate, which tracks the portion of the population that is either employed or actively looking for work, held steady at 62.5%. The “prime age” participation rate, which tracks workers between the ages of 25 and 54, increased slightly to 83.5%, two-tenths of a percentage point higher than in January.
Wages, a closely watched indicator of inflation, rose much less than expected and wage growth decelerated on an annual basis. Average hourly earnings were up just 0.1% in February from a month earlier, a marked slowdown from January’s 0.5% monthly gain. Annaully, wages were up 4.3%, another slowdown from Janaury’s 4.5% year-over-year increase.
January’s sizable wage increase gave investors cause for concern that price pressures would come roaring back and the Fed would have to keep interest rates elevated for longer than the markets are anticipating. Fed officials have maintained a cautious stance, saying they will wait for a clear signal that inflation is trending toward the Fed’s 2% target before they begin to discuss interest rate cuts. Following the release of the report, the futures markets moved slightly, with traders now pricing in a greater certainty that the Fed will begin cutting interest rates in June.
