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.
Today's column is all about jobs, so let's get to the February jobs report.
Job Growth Much Higher than Expected in February
Another month, another better-than-expected employment gain. Here are the highlights of the report:
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275,000 jobs were added last month, easily beating the Wall Street forecast of 198,000.
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The unemployment rate rose to 3.9%, higher than the 3.7% forecast.
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Wages ticked up 0.1% last month and were 4.3% higher than a year ago.
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Employment gains in December and January were revised downward by a total of 167,000.
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The labor force participation rate was 62.5% for the third straight month.
This report is a mixed bag of good news and bad news, where each reader can come to a different conclusion of the state of the labor market:
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The rise in employment is good news, although the steep revisions to the December and January figures make us wonder if February’s gain will be reduced.
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The increase in the unemployment rate to a two-year high is concerning, especially with all the layoff announcements so far this year. That said, weekly claims for unemployment are still very low.
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Wages did rise faster than prices over the past year, which is both good and bad news. Good for workers, but not so good for the fight against inflation. It’s also worth noting that annual rate of wage growth is slowing, but that’s to be expected as the labor market cools.
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The fact that the labor force participation rate hasn’t changed in three months is bad news, as we still need more people to jump into the workforce. Even with a slowing labor market, there are still 8.9 million available jobs out there, or 1.4 jobs for each person looking for one.
What does this all mean? While not as strong as it used to be, the labor market is still running pretty hot. Strong hiring, combined with a low unemployment rate and almost 9 million available jobs, equals a strong labor market. That said, all three of those things I just mentioned are not as strong as they used to be, which is good news for inflation and thus mortgage rates. Basically, we appear to be heading towards that soft landing we’re all hoping for, but don’t expect the Fed to cut rates any time soon.
One Last Thing
To make sure we end on a happy note, I just wanted to point out that, this week, the average mortgage rate this week fell for the first time in five weeks. The February jobs report brought 10-year treasury rates down this morning, so that is also good news. Next week we have two big data releases, the January consumer price index and retail sales. Depending on what they show, this data could keep pushing mortgage rates down, or start them rising again. But isn’t that always the case.