U.S. Employers Added 275,000 Jobs, Exceeding Expectations
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.
And with inflation continuing to ease, Americans’ gloomy feelings about the economy have started to lift.
Average hourly wage growth slowed considerably in February, compared to January, to $34.57 an hour, but that increase is still 4.3 percent more than the previous year.
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 services for 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 more 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 remained below 4 percent for two years, the longest run since the 1960s. Layoffs remain lower than pre-pandemic levels.
The resilience of the labor market has been aided by the recent expansion of the labor force, particularly the strong return of women who left their jobs during the pandemic and an influx of immigration to the United States. Economists say the arrival of immigrants in particular has been a key factor in closing severe gaps in the economy that have threatened the country’s ability to recover from pandemic shutdowns.
Among them is Ricky Chiu, who fled Hong Kong for Texas in late 2021 after authorities had 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 said he now works a job in information technology at a law firm in Houston, where he is “able to have a normal life,” he said.
But he worries about the perception that asylum seekers like himself “are leeching off the resources of this country.” “I would say we have a net positive effect on the job market,” Chiu, 37, said. “We are contributing to this society.”
The economy is roaring. Immigration is a key reason.
The labor market has cooled since its peak during the reopening of the economy following covid-19 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 do expect the unemployment rate 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.
Some economists worry that recent job gains that are concentrated within only a few sectors and could spell trouble on the horizon, as the broader economy becomes more vulnerable to shocks within a specific sector.
“Is it enough to be carried by these sectors or do we need gains that are more broad-based? That’s the question that needs to be answered,” said Diane Swonk, chief economist at KPMG. “I’d like to see more broad gains before I feel comfortable.”
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The construction industry, which is vulnerable to interest rate hikes, has seen moderate growth at best over the past year, with certain niches within the market feeling the pinch more than others.
At Forrest Street 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.
The Federal Reserve is loath to get involved in elections or politics. But 2024 is already shaping up to be quite the collision course.
Central bankers are eyeing multiple interest rate cuts starting sometime this year. And as the months pass, the chances grow that those cuts end up juicing the economy in the run-up to Election Day — just as Republicans and Democrats fight to leverage the economy in their appeals to voters.
Decisions about interest rates, Fed officials say, are based solely on how the economy evolves, and whether inflation keeps trending down. Federal Reserve Chair Jerome H. Powell reiterated that stance during two days of congressional testimony this week.
“We do not consider politics in our decisions. We never do. And we never will,” Powell said on CBS News’s “60 Minutes” last month. “And I think the record — fortunately, the historical record really backs that up.”
In his testimony, Powell told lawmakers the next move isn’t yet decided.
But rate cuts — which aren’t expected to start until sometime this summer — could read differently on the campaign trail. The Biden administration, for one, is playing up strong growth, a booming job market and easing inflation. Yet the president’s polling on the economy — especially on inflation — is weak, and his campaign would probably benefit from rate cuts that ease steep prices for mortgages, car insurance and business investment. (White House officials are diligent about not commenting on Fed policy, sticking to a longtime custom that President Donald Trump often abandoned.)
Meanwhile, Trump, the likely Republican nominee again this year, has capitalized on higher-than-normal inflation to attack Biden’s record. Trump has also called out high mortgage costs at his rallies, and quickly resumed his old playbook of lambasting the Fed from his time in office. During an interview with Fox Business Network’s Maria Bartiromo last month, Trump said “it looks to me like [Powell is] trying to lower interest rates for the sake of maybe getting people elected, I don’t know.” Trump added: “I think he’s going to do something to probably help the Democrats, I think, if he lowers interest rates.”
The specter of the election came up among lawmakers. During Powell’s Wednesday appearance before the House Financial Services Committee, chair Patrick T. McHenry (R-N.C.) said it was “highly inappropriate for lawmakers to attempt to influence monetary policy.”
“Chairman Powell, I have faith that you will not allow politics to cloud your judgment in the fight to tackle inflation,” McHenry said.
And on Thursday, Senate Banking Committee member Steve Daines (R-Mont.) told Powell: “Last time I checked, it’s going to get a little more political around here between now and November.”
If anything political is generally uncomfortable territory for Powell and his colleagues, this year will bring a particularly harsh spotlight. (First nominated to the Fed board by President Barack Obama, Powell was later nominated as Fed chair by Trump, then tapped for a second term by Biden.)
“The Fed will try very hard not just to be — but also to appear — nonpartisan during what is likely to be a pretty toxic election season,” said Krishna Guha, vice chairman of Evercore ISI and a former top official at the New York Fed. “First and foremost, the way they will try to do that is sticking to their knitting, and trying to be super rigorous about doing the job Congress has mandated them to do.”
So far, officials have signaled three rate cuts this year, and Powell has hinted that they wouldn’t start until the middle of the year. That has analysts increasingly looking to the Fed’s June meeting. After that, Fed officials convene in late July, mid-September, the first week of November and mid-December.
“Integrity is priceless,” Powell said on “60 Minutes.” “And at the end, that’s all you have. … We plan on keeping ours.”
