Employers added 678,000 jobs to the US workforce in February and the unemployment rate edged down to 3.8%, as the impact of the Omicron coronavirus variant eased, workers began returning to offices en masse, and demand for services increased.
Confounding expectations that the variant would dull workforce gains, the jobs data beat most economists’ forecasts by 240,000, with the total jobs added being 200,000 higher than the January figure.
The US Bureau of Labor Statistics said: “Job growth was widespread, led by gains in leisure and hospitality, professional and business services, healthcare, and construction.”
Despite the strong jobs figures, and unemployment nearing the pre-pandemic 50-year low of 3.5%, economists are concerned that the labor market is facing new, post-pandemic threats. These include soaring oil prices, geopolitical turmoil stemming from Russia’s invasion of Ukraine and a series of US interest rate increases beginning this month.
“The stronger than expected 678,000 gain in non-farm payrolls in February and upward revisions to previous months’ gains is another sign that the real economy has considerable momentum, with the Omicron wave having surprisingly little impact,” said Michael Pearce, US economist at Capital Economics.
“That will give the Fed greater confidence to push ahead with its planned policy tightening but, with wage growth now leveling off, there is arguably less pressure for officials to front-load an aggressive series of rate hikes over the coming months,” Pearce added.
The Federal Reserve chairman, Jerome Powell, said on Thursday that Russia’s invasion was likely to push inflation higher and could propel declines in financial risk-taking that could reduce new investment. US inflation currently stands at 7.5% in February – a 40-year high and far above the central bank’s target of 2%.
But those future concerns are weighed against the current picture of strong employment gains that are more than three times the average monthly increase of jobs in 2019 before the pandemic sent many workers home with a loss of 22m jobs in the spring of 2020.
A survey by the Associated Press-NORC Center for Public Affairs Research found that Americans are now much less worried about the pandemic than they were in January or December, and most restrictions and mask mandates are rapidly being lifted as workers return to offices.
According to the bureau, employment in the low-paid leisure and hospitality sector showed the strongest gains, with an increase of 179,000 jobs in February. But overall, the sector is still down by 1.5m, or 9.0%, from February 2020. However, employment in professional and business services is 596,000 higher than at that time.
Wage growth pressure appeared to be subsiding, economists said, with average hourly earning increases dropping to 5.1% from 5.7% on a annualized basis.
“While that might seem at odds with the falling unemployment rate, the job openings and quits rates and broader survey evidence have suggested labor shortages are leveling off a bit, which is consistent with pay growth stabilizing,” said Capital Economics’ Pearce.
