U.S. hiring grew faster than expected in February as the labor market remained surprisingly resilient in the face of higher interest rates, scorching-hot inflation and mounting recession fears.
Employers added 311,000 jobs in February, the Labor Department said in its monthly payroll report released Friday, easily topping the 205,000 jobs forecast by Refinitiv economists. It marked the second straight month of hotter-than-expected job data, after the economy added 504,000 positions in January – a total that was revised down from the initially reported 517,000.
The unemployment rate, meanwhile, unexpectedly ticked higher to 3.6%.
While monthly jobs data is always important, the Federal Reserve signaled that it is closely watching this particular report for signs that the labor market is finally softening and that the blowout figures in January were an anomaly as policymakers try to wrestle inflation under control. The consumer price index has cooled slightly from a peak of 9.1% in June, but it remains about three times higher than the pre-pandemic average.
MAJORITY OF WORKERS REGRET QUITTING DURING THE GREAT RESIGNATION
The latest hiring figures underscore the delicate challenge facing the Fed, which could ultimately have no choice but to continue hiking rates. Chairman Jerome Powell has lauded the slow but steady decline in inflation, but told reporters at the conclusion of the Fed’s two-day meeting on Wednesday that the labor market remains “extremely tight” and is still “out of balance.”
The central bank has already approved eight straight increases, including four back-to-back 75-basis-point hikes, raising the federal funds rate to a range of 4.5% to 4.75%, the highest since 2007. Powell indicated that policymakers expect to deliver a “couple” more rate hikes this year and signaled that rates could remain elevated for “some time.”
Hiking interest rates tends to create higher rates on consumer and business loans, which slows the economy by forcing employers to cut back on spending.
The data comes on the heels of a series of notable layoffs, particularly within the tech industry: Amazon, Apple, Meta, Lyft and Twitter are among the companies either implementing hiring freezes or letting workers go. That could soon bleed into the broader labor market; Powell has made it clear that policymakers anticipate job growth will slow and unemployment could climb as they raise interest rates higher, but he has argued that an alternative where prices soar unchecked is worse.
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