Employment Report February 2022:

Job growth accelerated in February, posting the largest monthly gain since July, as the employment picture edged closer to its pre-pandemic level.

Nonfarm payrolls for the month rose 678,000 and the unemployment rate was 3.8%, the Labor Department’s Bureau of Labor Statistics reported Friday.

That compares to estimates of 440,000 for the payroll and 3.9% for the unemployment rate.

In a sign that inflation may be easing, wages barely rose during the month, up just 1 cent an hour, or 0.03%, from estimates of a 0.5% gain. The year-over-year increase was 5.13%, well below the Dow Jones estimate of 5.8% as more low-wage workers were hired and 12-month comparisons helped cushion the most recent gains.

For the broader labor market, the report brought the level of US employees closer to pre-Covid levels, though still 1.14 million lower. Labor shortages remain a major impediment to filling the 10.9 million jobs that were open at the end of 2021, a historically high gap that had left around 1.7 vacancies per available worker.

“The labor market recovery remains very robust across the board as more Americans return to work,” said Eric Merlis, managing director of global markets at Citizens Financial Group. “Geopolitical issues and inflation pose ongoing threats to the U.S. economic recovery, but pandemic restrictions are lifting and we continue to see strong job growth.”

Markets, however, reacted little to the news as investors remained focused on the Russian-Ukrainian war. Dow futures showed a 300 basis point loss at the open and government bond yields were significantly lower.

As has been the case for much of the pandemic era, leisure and hospitality led employment gains, adding 179,000 for the month. The jobs shortfall for this sector, which has been most affected by government restrictions, is 1.5 million compared to pre-Covid levels.

The industry’s unemployment rate fell to 6.6%, down 1.6 percentage points from January and closer to 5.7% in February 2020. Wages actually fell slightly, falling from 2 cents an hour to $19.35. Increased hiring at bars, restaurants, hotels and other similar businesses is likely contributing to the slowing pace of wage increases.

“We’re getting back to pre-pandemic levels in terms of labor force participation. Job growth is still pretty healthy and strong. So things are going really well,” said Kathy Jones, chief securities strategist. fixed income at Charles Schwab. “As more and more people return to work and participation increases, the level of wage gains should start to decline a little. Regarding the Fed’s concern about inflation caused by people making more money, I guess that’s good news.”

Other sectors showing strong increases include professional and business services (95,000), health care (64,000), construction (60,000), transportation and warehousing (48,000) and trade in retail (37,000). Manufacturing contributed 36,000 and financial activities increased by 35,000.

“Real” unemployment increases slightly

Previous months have seen upward revisions. December rose to 588,000, an increase of 78,000 from the previous estimate, while January rose to 481,000. Together, the revisions added 92,000 more than previously recorded and brought the average to three month to 582,000.

The labor force participation rate, a closely watched measure indicating worker engagement, rose to 62.3%, still 1.1 percentage points from the pre-pandemic level in February 2020. Another measure unemployment which includes discouraged workers and those in part-time jobs for economic reasons, and is sometimes referred to as the “real” unemployment rate, also rose slightly, to 7.2%.

The jobs trend is clearly on the rise after a winter surge in Covid omicron cases, while exacting a heavy human toll, left little footprint on jobs.

“If we see more numbers like this moving forward, we can be optimistic for this year,” wrote Nick Bunker, director of economics research at job search site Indeed. “Employment is growing at a healthy pace and unemployment is increasingly approaching pre-pandemic levels. Yet in these uncertain times, we can’t take anything for granted. But if the recovery can maintain its current pace , several key labor market health indicators will reach pre-pandemic levels this summer.”

The economy has also been grappling with pernicious inflationary pressures at their highest level since the days of stagflation in the early 1980s. The Labor Department’s main inflation gauge showed that consumer prices have rose to a level of 7.5% in January, a figure that is expected to climb to nearly 8% when the February report is released next week.

Amid all of this, companies continue to hire, filling the large gaps that remain in the leisure and hospitality sector as well as many other industries hit by the pandemic.

The Federal Reserve is watching employment numbers closely. Monetary policymakers generally view the economy as close to full employment, adding pressure to prices that have soared due to pandemic-related supply shortages and demand surges.

The inflation came as Congress pumped more than $5 trillion in stimulus into the economy while the Fed kept benchmark borrowing rates pegged near zero and pumped nearly $5 trillion into the economy through asset purchases.

Now, Fed officials expect this month to begin raising interest rates, with the market expecting those hikes to likely continue throughout the year.

The February jobs report “will give the Fed greater confidence to move forward with planned policy tightening but, with wage growth now stabilizing, there is arguably less pressure for officials to accelerate an aggressive round of rate hikes over the coming months,” wrote Michael Pearce, senior U.S. economist at Capital Economics.

Traders continued to fully price a 25 basis point rate hike at the March Fed meeting and see a strong possibility of five more such hikes by the end of the year, the data shows. of the CME Group.

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