| 28 March 2023, Tuesday |

Strong US job growth persists; wage inflation shows signs of slowdown

In February, the U.S. economy added jobs quickly, but monthly wage growth slowed and the unemployment rate increased, suggesting some loosening of the labor market. As a result, financial markets reduced their expectations that the Federal Reserve would raise interest rates by half a percentage point this month.

The labor supply increased last month, according to the Labor Department’s widely watched employment report, which helped to push the proportion of people in their prime working years to its highest level since right before the COVID-19 pandemic.

Some economists viewed the mixed report as raising the chances that the economy would avoid a much feared recession this year, and instead only experience slower growth.

“This is a strong foundation for the economy,” said Nick Bunker, head of economic research at the Indeed Hiring Lab. “If wages continue to grow around its current rate or even a bit higher, the labor market may be able to stay strong and not throw gas on the inflation fire.”

Nonfarm payrolls increased by 311,000 jobs last month, the survey of establishments showed. Data for January was revised lower to show 504,000 jobs added instead of the previously reported 517,000. But the growth in employment was not as broad as in prior months, with only 56% of industries adding to payrolls compared to 68% in February. That was the lowest share since April 2020, when pandemic lockdowns were in place.

Economists polled by Reuters had forecast job growth of 205,000, with estimates ranging from 78,000 to 325,000. The economy needs to create 100,000 jobs per month to keep up with growth in the working-age population.

The larger-than-expected increase in payrolls suggested that January’s surge in hiring was not a fluke.

Economists had viewed job growth in January as flattered by a host of factors, including unseasonably warm weather, annual benchmark revisions to the data as well as overly generous seasonal adjustment factors, the model the government uses to strip out seasonal fluctuations from the data.

The leisure and hospitality sector accounted for a third of the jobs created last month, adding 105,000 positions, the bulk of them at restaurants and bars. Employment in leisure and hospitality remains 410,000 jobs below its pre-pandemic level.

Retailers hired 50,100 more workers, while government payrolls increased by 46,000 jobs.

Employment in professional and business services rose by 45,000 jobs and healthcare added 44,000 positions. Construction payrolls grew by 24,000 jobs, but manufacturing employment dropped 4,000. The information industry shed 25,000 jobs, while transportation and warehousing lost 21,500 positions.

Average hourly earnings rose 0.2% last month after gaining 0.3% in January, with most sectors experiencing a slowdown. That raised the year-on-year increase in wages to 4.6% from 4.4% in January, partly due to last year’s flat reading dropping out of the calculation. Wage growth slowed to a three-month annualized pace of 3.6% from a 4.4% rate.

  • Reuters