U.S. job growth surge underscores economy's strength as headwinds rise
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[March 05, 2022]
By Lucia Mutikani
WASHINGTON (Reuters) - U.S. job growth
accelerated in February, pushing the unemployment rate to a two-year low
of 3.8% and raising optimism that the economy could withstand mounting
headwinds from geopolitical tensions, inflation and tighter monetary
policy.
The Labor Department's closely watched employment report on Friday also
showed the economy created 92,000 more jobs than initially estimated in
December and January. It suggested that the labor market was moving past
the COVID-19 pandemic and that the economy has weaned itself off
government money.
Though average hourly earnings were flat last month, that was because of
the return of workers in lower-paying industries and a calendar bias.
Companies are raising wages to attract scarce workers, which is
contributing to higher inflation.
Economists said absent Russia's war against Ukraine, which has pushed up
prices of oil, wheat and other commodities, the strong employment report
would have pressured the Federal Reserve to raise interest rates by half
of a percentage point later this month.
"On balance, despite weakness in wages, this is one more in a long line
of reports suggesting the Fed should have started raising rates ages
ago," said Chris Low, chief economist at FHN Financial in New York. "The
Fed has its work cut out if it wants to slow demand enough to stabilize
the unemployment rate at 4%."
![](http://archives.lincolndailynews.com/2022/Mar/05/images/ads/current/LPL_small%201.gif)
The survey of establishments showed nonfarm payrolls jumped by 678,000
jobs last month, leaving employment 2.1 million jobs below its
pre-pandemic level. Economists expect all the lost jobs will be recouped
by the third quarter of this year.
Fed Chair Jerome Powell this week described the labor market as
"extremely tight," and told lawmakers that he would support a
25-basis-point interest rate increase at the U.S. central bank's March
15-16 policy meeting. Economists expect as many as seven rate hikes this
year.
Employment growth was boosted by subsiding infections of the Omicron
variant of COVID-19. At least 1.6 million people reported they were not
at work last month because of illness, sharply down from a record 3.6
million in January.
Economists polled by Reuters had forecast payrolls would rise by 400,000
jobs, with estimates ranging from as low as 200,000 to as high as
730,000. February's broad increase in employment gains was led by the
leisure and hospitality industry, one of the sectors hardest hit by the
Omicron variant.
Leisure and hospitality payrolls increased by 179,000 jobs. Employment
at restaurants and bars shot up 124,000, while hotels and motels added
28,000 workers. Employment in the professional and business services
industry increased by 95,000 jobs.
Retailers added 37,000 jobs. Manufacturing payrolls increased by 36,000
jobs, while construction employment rose by 60,000. Government
employment increased by 24,000 jobs.
The report was, however, overshadowed by the Russia-Ukraine war. Stocks
on Wall Street dropped sharply in early trading before paring some
losses, while the dollar rallied against a basket of currencies as
investors sought safe havens. U.S. Treasury yields fell.
![](http://archives.lincolndailynews.com/2022/Mar/05/images/ads/current/charrons_bch_2022.png)
MORE PEOPLE WORKING
Russia's invasion of Ukraine has sent oil prices surging above $100 a
barrel, which will keep U.S. inflation boiling for a while and hurt
consumer spending in the near term.
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U.S. job growth surged in February, pushing the unemployment rate to
a two-year low of 3.8%, as the economy faces mounting headwinds from
geopolitical tensions and tighter monetary policy. This report
produced by Chris Dignam.
![](http://archives.lincolndailynews.com/2022/Mar/05/images/ads/current/heartland_lda_NOV2021.png) The unchanged reading in average
hourly earnings followed a 0.6% increase in January. Data for the
employment report is collected during the week that includes the
12th day of the month.
"There's a very well-established pattern when the 15th of the month
falls on a Saturday that typically boosts average hourly earnings
that month and the following month falls to the downside," said
Robert Rosener, a senior economist at Morgan Stanley in New York.
"That was the case in January, when the 15th of the month fell on a
Saturday ... and February was expected to show some payback that
would drag down the figure."
Wages rose 5.1% in the 12 months through February after advancing
5.5% in January. Wages for production and non-supervisory workers
rose 0.3% from January.
The average workweek increased to 34.7 hours from 34.6 in January.
Aggregate hours worked rebounded 0.8%, which bodes well for economic
growth this quarter.
"With the rebound in hours worked and further gains projected for
March, real GDP is expected to rise by close to 3% (annualized rate)
in the first quarter," said Brian Bethune, professor of practice at
Boston College. "The 'Black Swan' massive invasion of the Ukraine,
combined with related jumps in crude oil and other commodity prices,
nevertheless, throws some sand into the machinery of growth in the
first half."
Details of the household survey from which the unemployment rate is
derived were equally strong. Household employment increased by
548,000 jobs, more than enough to absorb the 304,000 people who
entered the labor force.
The unemployment rate dropped two-tenths of a percentage point to
3.8% last month, the lowest level since February 2020. The labor
force participation rate, or the proportion of working-age Americans
who have a job or are looking for one, increased to 62.3%, the
highest level since March 2020, from 62.2% in January.
Men accounted for the increase, with 479,000 entering the labor
force, while 48,000 women left.
![](http://archives.lincolndailynews.com/2022/Mar/05/images/ads/current/castlemanor_sda_FINANCIAL_2017.png)
"More individuals on payrolls means greater aggregate purchasing
power from consumers," said Peter Essele, head of portfolio
management at Commonwealth Financial Network in Waltham,
Massachusetts. "The result could set up a strong second half as more
spending from the newly employed is put toward goods and services.
If the current trend continues, today's equity markets will look
like a bargain by year end."
The employment-to-population ratio, viewed as a measure of an
economy's ability to create employment, rose to 59.9%, also the
highest since March 2020, from 59.7% in January.
But the number of people working part-time for economic reasons shot
up 418,000 to 4.1 million. That lifted a broader measure of
unemployment, which includes people who want to work but have given
up searching and those working part-time because they cannot find
full-time employment, to 7.2% from 7.1% in January.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama, Andrea
Ricci and Paul Simao)
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