February jobs report shows another big gain: live updates
It is already clear that the Federal Reserve is poised to raise interest rates by a quarter point this month as it seeks to make borrowing more expensive in a bid to calm the economy.
Central bank chairman Jerome H. Powell made that clear this week.
But February jobs data released on Friday will inform policymakers as they discuss central bank balance sheet reduction plans (something that can squeeze extra juice out of the economy) and present estimates. how quickly interest rates will rise over the months. before.
The latest jobs report showed the economy added 678,000 jobs last month. But more importantly, from the Fed’s perspective, it showed that unemployment fell to 3.8%, workers reentered the labor force and wage growth stalled after a series of rapid increases.
The data reaffirms that the labor market is buoyant and may also reduce concerns that the country is at the start of an inflationary spiral in which wage and price increases push each other higher.
This could influence how officials view the outlook for interest rates in the months and years ahead. The Fed will release guidance in its quarterly summary of economic projections alongside its March policy decision, and given that a rate hike is already expected, these policy expectations should take center stage.
Russia’s invasion of Ukraine has made the way forward more uncertain, so the economic projections will serve more as a blueprint than a blueprint. But for now, the economy looks solid – and officials should anticipate a series of policy changes in 2022 and 2023.
But the numbers may give the Fed a bit more leeway to withdraw support steadily, but not frantically. As jobs proved plentiful and workers were hard to find, wages began to rise rapidly, attracting the attention of the Fed. Rapid wage gains have raised the possibility that labor costs may begin to fuel higher prices, making them last longer.
“The big thing we don’t want is for inflation to take root and become self-perpetuating,” Powell said in congressional testimony this week. “That is why we are moving forward with our program to raise interest rates and bring inflation under control.”
The report released on Friday is just one number and the data is regularly revised, but the new figures could reduce the pressure at the margin. The average hourly wage rose 5.1% in the year to February, well below the 5.8% gain that economists had expected. On a monthly basis, the salary has not increased at all.
The annual gain is still a solid pace of wage increases for American workers — hourly earnings typically rose 2-3% in the years before the pandemic — but if wage gains continue to moderate, they could seem more durable to central bankers.
This is especially true because the slowdown has come as the proportion of people working or looking for work has risen and weekly working hours have increased, suggesting that employers are finding a labor supply. not available. With more workers available, the economy may be able to produce more and grow faster without overheating.
Fed officials had signaled they would be watching this jobs report closely, the last they will get before their meeting.
Chris Waller, a Fed governor, said late last month that he could support an aggressive start to Fed interest rate hikes if inflation reports and the jobs report from February showed “that the economy is still extremely hot”.
Mr. Powell appears to have dismissed the idea of a big rate hike in March, but Mr. Waller’s emphasis demonstrated just how much each new data point can help affirm – or complicate – how the central bankers understand the economy at a critical time.
But officials will have to weigh the latest numbers against what is happening in Ukraine. And it’s not obvious at this point how that might affect the way forward for the policy, as the war drives up gasoline prices but may weigh on consumer spending.