The labor market showed some rare signs of weakness in February, as the unemployment rate unexpectedly rose to its highest level since the Federal Reserve began hiking rates in early 2022, though job growth was above economists’ forecasts.
- The U.S. added 275,000 jobs in February, topping consensus economist estimates of 200,000.
- The unemployment rate came in at 3.9%, higher than forecasts of 3.7%, where it was in January.
- That’s the highest unemployment rate since January 2022.
- Average hourly wages rose by 0.1% from January to February on a seasonally adjusted basis, well below January’s 0.6% month-over-month growth and estimates of 0.3%, with annual wage growth coming in at 4.3%.
Wage growth is well above inflation, which most recently came in at 2.8% as measured by the Federal Reserve’s favored core personal consumption expenditures metric, as the swelling of Americans’ pay stubs outpaces how much they need to spend on goods and services. Though it’s up from its 54-year low of 3.4% set early last year, the national unemployment rate has stayed comfortably below 4%, a fairly surprising feat considering inflation’s downward trend. A commonly accepted tenet of economic theory is the inverse relationship between inflation and unemployment, meaning a significant decline in inflation typically brings an equal bump to jobless rates. The Fed’s ongoing tightening cycle is not a painless one for workers, evidenced by high-profile corporate layoffs, limited job switching and much lower wage growth than during the 2021-22 pay boom. It is widely expected the Fed will begin cutting interest rates at some point this year, a change which would likely stimulate the labor market as corporate budgets lighten with dwindling borrowing costs.
