Everyone could find something positive in the February jobs report, which highlighted the Federal Reserve’s efforts to battle inflation as well as positive developments for American workers.
Why it’s important The most recent payrolls report was anticipated to provide answers to the pressing questions at hand by economists and data observers: Will additional hot data compel the Fed to tighten policy more firmly?
The report doesn’t definitively answer the question. Some information suggests that the job market is still bursting at the seams, while other information indicates that inflationary pressures are easing.
Details: Employers have an insatiable thirst for additional employees, according to January’s scorching-hot employment report. That is still the case, which is good news for job hunters.
Last month, employers continued to add staff at a rapid rate, with 311,000 overall positions. And revisions did not dramatically alter the picture for January or December.
Meanwhile, a surge of workers (roughly 270,000) re-entered the labor force last month, helping push up the unemployment rate slightly to 3.6%.
Notably, the labor force participation rate for prime-age workers (those between 25 and 54) is back at its pre-pandemic level of 83.1%.
That more workers are returning to the job market is good news, because it could help bring the labor market back into balance in a less painful manner. Employer demand for workers does not have to come down as much if more workers are available to meet said demand.
Between the lines: Wages are especially crucial for the inflation outlook, and there the news looks favorable. Average hourly earnings were up only 0.2% last month.
Over the last three months, they’ve risen at a 3.6% annual rate, down from 4.9% in the final months of last year. Slower wage growth should diminish price pressures.
What they’re saying: “If you have a labor market that is showing less tightness on the labor force participation front, that will tend — all else equal — to put downward pressure on wage growth,” Gregory Daco, chief economist at EY-Parthenon, tells Axios.
The bottom line: More job reports like the one in February could mean a more gradual labor market cooling that would be less painful for American workers.
Attention now turns to next week’s Consumer Price Index report, which may hold more clues about inflationary pressures and could be the deciding factor on whether the Fed hikes by a quarter-point or half-point in 12 days.