The U.S. added 311,000 net new jobs in February and the unemployment rate rose to 3.6%. For the eleventh month in a row, U.S. job gains exceed market expectations. Wage growth was a mixed bag for the Fed’s upcoming interest rate decision on March 22. While the labor market is not flashing signs of a recession, the future of Fed action depends most on next week’s inflation report.
✅ Job seeker recovery, complete
Something worth celebrating: The job seeker recovery is complete! The prime-age labor force participation rate – the share of 25 to 54 year olds employed or looking for work – rose strongly to 83.1%, fully rebounding to its pre-COVID mark. That means the labor supply worries – “where have all the workers gone?” – that caused so much hand-wringing in 2021 and 2022 turned out to be overblown. The workers have returned, but the demand for workers remains strong – job openings (and competition) are still high.
Wage growth leveling off at high level
The Fed is laser-focused on bringing back price stability. The key question for Chair Jay Powell is: How much is the strong labor market contributing to inflation? Average hourly earnings for all workers declined slightly in year-over-year terms. While that is a welcome sign for the Fed, the more narrow measure of private sector non-managers showed a strong month-over-month jump in February. The more accurate 3-month trend is flat at 4.8%. So this slowdown is perhaps not as quick as the Fed had hoped to see. That said, there’s no sign of an acceleration either. We’re in a holding pattern where the macro outlook hinges on inflation readings we’ll get next week.
Industry job gains broad-based, with room to grow
Job gains were spread across most major industries. Service-providing employment was especially strong, as consumers continue to revenge-spend on travel, dining, etc. post-COVID. Leisure and hospitality alone added 105,000 jobs, while gains in retail, government, and professional and business services were also strong.
Information, the closest we have to a technology sector from the BLS, lost 25,000 jobs last month. It seems the once-elusive tech layoffs have finally made their mark in the sector, adding fodder to the argument for a mild “white-collar” recession.
While U.S. job growth has risen to a cumulative 2.8 million jobs above pre-COVID levels, it’s still short on leisure and hospitality and government jobs. Leisure and hospitality especially has room to expand – with demand for services like eating out and traveling still elevated, labor in the sector is in high-demand.
Many sectors that have returned to full employment still seem to be expanding, with healthcare adding 44,000 jobs last month despite reaching pre-COVID employment levels last year. Others, like transportation and warehousing, have seen the sun set on their empire of job gains. After leading sectors in gains throughout 2021, the shift in consumer demand has hit the sector hard; it lost 22,000 jobs in February.
What does this mean for recruiters?
Month after month, we see another incredible labor market performance. We admitted to running out of superlatives two months ago. To put it simply: the labor market is strong. Recruiters can be assured that a devastating, workforce-crushing recession is almost definitely out of the picture. Of course, recruiters know the problems with the opposite situation all too well by now. A strong labor market means intense competition among recruiters for workers – but the increase in labor force participation is a good sign for recruiters.
Less reassuring is what this report tells us about the Fed’s next interest rate decision. The report was strong but not too strong. It featured leveled wage growth that remains too hot. Today’s jobs data essentially punted the decision onto next week’s inflation data.
Co-author: Liz Anderson