Hiring Stays Strong in Feb-23
Labor force grows, wage growth slows
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U.S. employers added 311,000 net new jobs in February, about 100,000 more than expected. This is the eleventh straight month that job gains were higher than predicted. I’m astounded by both the strength of the U.S. labor market and the inability of forecasters to adjust to that strength. Over the first two months of 2023, U.S. employers have added 815,000 net new jobs. On average, we added almost exactly half that many jobs in January and February of 2013-2019.
The unemployment rate inched up to 3.6%, which is still extremely low by historical standards, and the labor force participation rate increased to 62.5%, the highest level since March 2020. That’s good news, but the LFPR is still well below the pre-pandemic level of 63.3%.
Big picture, U.S. employers are still hiring at a really fast pace. February job gains were concentrated in leisure and hospitality (+105,000), with restaurants accounting for about 70,000 of those jobs, and retail trade (+50,100). A few segments lost jobs, including information (think tech, -25,000), transportation and warehousing (-21,500), manufacturing (-4,000), and financial activities (-1,000).
Notice that the added jobs came in lower wage segments, while higher wage segments (like tech and finance) lost positions. While composition effects don’t have much impact on wages on a month-to-month basis, coincidentally average hourly wages posted their smallest increase since February 2022, rising $0.08 (+0.2%).
So employers are hiring, which the Fed doesn’t necessarily want to see as they try to suppress inflation, but the labor force is growing and wage growth is slowing, which the Fed does want to see. As long as rapid job gains coincide with labor force growth, it’s not a huge problem.
The Fed seems to be debating between a 25 or 50 basis point rate hike at their next meeting, and today’s jobs data doesn’t provide much clarity on what they’ll do. That means that next week’s Consumer Price Index data (released on Tuesday) will be a big determinant of the size of the next rate hike.
There was a lot of other economic data this week, including new data on job openings, housing, and consumer sentiment. You can catch up on all of that in Week in Review, which will go out later today to paying subscribers.
As always, you can read Anirban’s in-depth thoughts regarding the construction industry’s labor market at Associated Builders and Contractors.
Three (somewhat) Key Takeaways
The prime age (25-54) labor force participation rate (83.1%) is now higher than it was in February 2020 (83.0%), the month before the pandemic began.
The number of people unemployed for 27 weeks or longer is now below pre-pandemic levels.
Women (3.5%) have a lower unemployment rate than men (3.6%) for the second straight month.
What to Watch
The Consumer Price Index data on Tuesday.
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