Matt Rourke / AP
Hiring surged last month as US employers added 678,000 jobs, the biggest increase since last July, as the recovering economy continued to recover from the coronavirus pandemic.
The unemployment rate fell to 3.8% last month, from 4% in January. Job gains in December and January were also revised to a total of 92,000 jobs.
The health outlook has improved dramatically since a winter wave of infections tied to the omicron variant.
February’s job gains were universal, with bars and restaurants adding 124,000 jobs, construction companies adding 60,000 and factories adding 36,000. The economy has now recovered more than 90% of the payroll jobs that were lost in the early months of the pandemic.
But the strength of hiring this spring will depend in large part on worker availability.
And Russia’s invasion of Ukraine adds another wild card to the economic forecast.
“Omicron, which is now fading across most of the country, isn’t having as much of an economic impact as expected,” said Nela Richardson, chief economist at payroll processing firm ADP. “But it may have impacted keeping some workers on the sidelines, due to health concerns.”
The economy is still short of workers
The shock of the pandemic has pushed aside a larger proportion of workers in the US than in other countries. The number of people working or looking for work has increased in recent months, but remains below pre-pandemic levels. The workforce grew by 304,000 people in February.
“I think as people start to feel a little bit more comfortable going back to the office, and people feel like they don’t have to be at home with the kids anymore, I think you’ll start to see that number continue. higher,” said Jay Bryson, chief economist at Wells Fargo. “But that said, there are some people who have retired and probably won’t come back.”
Employers are raising wages
Many employers have raised wages to attract scarce labor. Average wages in the private sector were 5.1% higher last month than they were a year ago. Workers in low-wage industries saw some of the biggest increases. At restaurants and hotels, for example, average wages in February were 11.2% higher than they were a year ago.
In some cases, rising wages are contributing to rising prices. And because prices are rising rapidly, the wages of many workers aren’t going as far as they used to.
For the past two years, the Federal Reserve (Fed) has kept interest rates close to zero, in an effort to support a pandemic-ridden economy and encourage hiring.
But now the Fed is preparing to shift direction – focusing less on jobs and more on inflation, which has increased the highest level in nearly 40 years.
“The unemployment rate is low. Wages are rising. The labor market is pretty healthy. And inflation is all too high,” Fed Chairman Jerome Powell told the Senate Banking Committee on Thursday. Five. “We have to take responsibility for inflation and we will use our tools to bring it down.”
Nam Y. Huh / AP
Fed prepares to raise interest rates
Powell said he expects the Fed to begin raising rates — likely a quarter of a percentage point — when policymakers meet in less than two weeks. The aim is to reduce demand, which already exceeds supply resulting in higher prices.
But Russia’s invasion of Ukraine has added a new wrinkle to the Fed’s challenge. The conflict has sharply increased the prices of energy and wheat. But it also risks slowing economic growth.
“On the one hand, you have a significantly higher rate of inflation than what the Fed wants to see,” Bryson said. “But on the other hand, you have all these uncertainties as it relates to what’s going on in Russia and Ukraine right now. So they’re not autopilot. They’re going to be very attentive. Pay attention to what’s going on.”