Economy Adds 275,000 Jobs In February, Unemployment Rate Inches Up To 3.9%
Housing market expected to see delayed boost from lower mortgage rates.
The U.S. economy saw a surge in job creation last month, with 275,000 new jobs added in February, according to the latest report from the U.S. Bureau of Labor Statistics. However, the unemployment rate increased from 3.7% to 3.9%, signaling a rise in job seekers.
"This labor market tightness is contributing to upward pressure on inflation, particularly in the service sectors of the economy," Mortgage Bankers Association Deputy Chief Economist Joel Kan said. “However, the labor market’s continued resiliency is one of several factors keeping mortgage rates from declining much further in the near term, as it increases the likelihood that the Fed will not rush to cut rates.”
This unexpected increase in job growth comes as a positive surprise, exceeding economists' expectations of around 200,000 new jobs for the month. However, the report also revealed a cooling trend in job gains for the previous two months, with January's job additions revised down by 124,000 to 229,000 and December's revised down to 290,000 from 333,000.
Despite the rise in the unemployment rate, which is now at its highest level in over two years, it remains low by historical standards. The labor force participation rate, which measures the share of the population actively seeking employment, held steady at 62.5%.
Federal Reserve officials are closely monitoring key indicators like the jobs report for signs of inflationary pressures. While wage growth was subdued last month, with average hourly earnings increasing by just 0.1% in February, year-over-year wage growth stood at 4.3%.
Fed Chair Jerome Powell reiterated this week that interest rate cuts are not imminent as the central bank awaits further evidence of inflation stabilizing. The Fed aims for inflation to fall back to its 2% target before considering any changes to its monetary policy.
First American Economist Ksenia Potapov said "All signs point to a slowly cooling, but strong, labor market. When the FOMC convenes later this month, they will issue new guidance and projections for economic conditions. This jobs report is unlikely to materially change the Fed's expectations for economic conditions and any potential interest rate moves.”
For the housing market, Potapov said, "this suggests the boost from lower mortgage rates likely won’t materialize until well after the traditional spring home-buying season begins.”
Job gains were observed across various sectors, including healthcare, government, food services, social assistance, transportation and warehousing.
Despite the positive job growth, challenges persist in the labor market, including the number of long-term unemployed individuals, which remained unchanged at 1.2 million in February. Additionally, the number of people employed part-time for economic reasons remained at 4.4 million, indicating ongoing underemployment issues.