The report, which beat expectations, marked the 39th straight month of job gains — in what economists broadly consider an exceptionally strong recovery from the widespread job losses wrought by the coronavirus pandemic.
“The labor market remains undeniably strong,” said Joe Brusuelas, chief economist at the accounting firm RSM. “It’s hard to say that there are cracks that have formed or are forming.”
As the election year enters full swing, President Biden has repeatedly touted the booming jobs market and easing inflation as a political victory, including in his fiery State of the Union address Thursday night.
“Three years ago, I inherited an economy on the brink,” Biden said in a statement Friday about the strong jobs numbers. “Now, our economy is the envy of the world.”
And with inflation continuing to ease, Americans’ gloomy feelings about the economy have started to lift.
The three major stock indexes rose upon news of the solid jobs report Friday, suggesting investors are cautiously optimistic that the Federal Reserve can bring down inflation without triggering an economic downturn.
Health care, government, food and drinking establishments, and social assistance continued to see the largest job gains. Health-care employers churned out 67,000 jobs in February, reflecting demand from the aging baby boomer population. Public-sector payrolls rose by 52,000, mostly in local and federal government, as coffers have filled up. Food and drinking establishments added 42,000 jobs after recent sluggish growth, as Americans and particularly retirees have spent more on travel and dining out.
Transportation and warehousing, which had ballooned and then contracted after the e-commerce boom of the pandemic, finally began to pick up again, adding 20,000 jobs in February. Most of those gains were in delivery services and air transportation roles.
January’s job gains, which shocked economists, were revised down significantly to 229,000 (from 353,000), reflecting volatility in the early data.
A year ago, many analysts had predicted that the Federal Reserve’s campaign to raise interest rates to ease inflation would lead the economy into a painful downturn, but that hasn’t happened. The unemployment rate has stayed below 4 percent for more than two years, the longest run since the 1960s. Layoffs remain lower than pre-pandemic levels.
Still, the report was sprinkled with signs that workers are gradually losing leverage in the labor market. Average hourly wage growth slowed considerably in February compared with January, to $34.57 an hour, but that increase is still 4.3 percent more than the previous year, with wages consistently beating inflation since last spring.
And several demographic groups more vulnerable to job losses — women, African Americans, teenagers and disabled people — saw unemployment rates spike. The unemployment rate for women shot up to 3.9 percent from 3.4 percent. The number of workers considered unemployed increased by 334,000 from January to February, up to 6.5 million. This is up from 6 million a year prior.
Last month, layoffs rose to their highest level for any February since 2009, at 84,638, according to a separate report from the employment firm Challenger, Gray & Christmas. Technology and finance have offloaded the most workers.
But policymakers have been looking for signs that the economy is no longer overheating. Jason Furman, an economist at Harvard University and former adviser to the Obama White House, said slowing growth and rising unemployment could be “a small notch” toward persuading the Fed to cut rates sooner. “It’s a tiny smidge less concern about inflation and a tiny smidge more concern about recession,” he said.
The increase in unemployment is partly due to more people joining the labor market from the sidelines. “Prime-age” workers, between 25 and 54, participated in the labor market in February at a high rate, 83.5 percent, matching 20-year records hit last summer. Women, in particular, played a big role in buoying the labor market as they have returned to jobs left during the pandemic.
The influx of new job seekers is creating more slack in the labor market, said Julia Pollak, chief economist at the jobs site ZipRecruiter. That’s allowing companies to be more selective.
“Companies have reduced confidence in short-to-medium-term hiring plans at the moment,” Pollak said.
Labor market resilience has been aided by the arrival of millions of immigrants to the United States, who helped close severe shortfalls in hiring that threatened the country’s ability to recover from pandemic shutdowns.
Among those immigrants is Ricky Chiu, who fled Hong Kong for Texas in late 2021 after authorities arrested him for participating in a mass demonstration against the Hong Kong government, causing him to fear further retribution if he remained, he said. An asylum seeker, Chiu now works in information technology at a law firm in Houston, where he is “able to have a normal life,” he said.
But Chiu, 37, worries about the perception that asylum seekers like himself “are leeching off the resources of this country,” he said. “I would say we have a net-positive effect on the job market. We are contributing to this society.”
The labor market has cooled notably since its peak during the reopening of the economy following pandemic lockdowns. Workers have stopped quitting their jobs en masse. Employers have eased off hiring. And there are now roughly 1.4 job openings for every unemployed worker in the United States. That ratio gives workers continued leverage in the labor market but is down from the two job openings for every unemployed worker last year.
Economists expect the unemployment rate to continue to climb in 2024 as the full impact of high interest rates ripples through the economy — with a recent Congressional Budget Office report projecting that unemployment will rise to 4.4 percent by the end of 2024. Other data shows that some employers who had been proceeding cautiously are beginning to resume investing in their workforce in anticipation of the Federal Reserve cutting interest rates in the summer.
Hiring in manufacturing, which is sensitive to high interest rates, has also been flat for over a year, adding essentially no new jobs in February. That’s despite massive federal investment into clean energy projects and semiconductors from the Biden administration that’s expected to ignite the industry, though the full effects of the spending are years away.
The construction industry, also vulnerable to interest rate hikes, has seen moderate growth at best over the past year, adding 23,000 jobs in February, with certain niches within the market feeling the pinch more than others.
At Forest St. Builders, a high-end custom home builder in Denver, business has been slow this winter. Ian Price, the company’s president, said that’s because his typical clients are in their 40s and 50s, largely already homeowners and less willing to scale up to new, larger homes “because of interest rates” — instead opting for remodels.
But the slowdown has also meant it’s easier to hire construction workers, Price said, without having to pay more to attract them from other firms. This month, he posted two construction positions online and received 90 job applications within a few days.
“During covid, we had to make sure we held on to the talent we had and up our wages because McDonald’s was paying $20 an hour and because of inflation,” Price said. “[Now] we don’t have to offer a premium off of the bat like we used to.”
