Gregory Heym is Chief Economist at Brown Harris Stevens. His weekly series, The Line, covers new developments to the economy, including trends and forecasts. Read on for the latest report and subscribe here to receive The Line in your inbox.
Nonfarm payrolls rose by 678,000 last month, a surprisingly high figure and much better than the 440,000 expected. Revisions to the data for December and January added an additional 92,000 jobs, so that is also good news. The unemployment rate fell to 3.8%, which makes it a hat trick of positive data for the labor market. Employment is now just 1.4% lower than its pre-pandemic level, and theunemployment rate is just 0.3% higher. Job gains were seen across theboard, and led by a 179,000 increase in the leisure and hospitality sector. One caveat is that the data for this report was collected before Russia invaded Ukraine, so we’ll have to wait until next month to see how that impacts hiring. So, the next logical question is, was there any bad news in this report? Wages were flat in February, and are up 5.1% over the past year. Normally 5.1% annual growth in wages would be great news, but inflation has been running at a 7.5% clip so "real" wages are still declining. We’ll get the February inflation figures next week, but I don’t expect to see prices leveling off for a few months at least. Many—especially me—had been hoping the Federal Reserve would hike rates by 0.50% at their meeting this month, but the invasion of Ukraine and subsequent jump in oil prices has taken that off the table. At least this report can make the Fed feel better about a 0.25% hike, as job growth has been very strong the past few months. The easing of more COVID restrictions—particularly those in New York—should provide a boost to hiring in the near future. But, the big question remains: Will companies be able to find the workers? We’ll get the latest data on job openings next week, but at last count there were still almost 11 million available jobs in the United States. In other good labor-market news, initial claims for unemployment fell to 215,000 last week, less than the 225,000 estimate. This was the second-lowest figure of 2022, and a good sign that hiring should remain strong in the coming weeks. To sum up, the February jobs data was mostly great news, but the Fed still has a lot of work to do.