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February marked the 39th straight month of job growth, reflecting an exceptionally strong recovery from the widespread job losses during the pandemic. Unemployment rose to 3.9%, a two-year high, but remained under 4% for the 25th consecutive month. This is the longest stretch of unemployment below 4% since the 1960s. While we have a strong labor market, fears that it was getting too hot again were somewhat allayed this month with the rise in unemployment, the revision of the January and December job numbers, and a weak rise in wages.

The Numbers*:

The U.S. economy added 275,000 jobs, higher than the estimate of 200,000 jobs, with the highest job gains occurred in health care, government, food and beverage, transportation and warehousing. Other industries held steady with only minor declines in building material and garden equipment, and electronic and appliance retailers.

The unemployment rate rose to 3.9% from 3.7% after remaining steady for three months. The number of unemployed people increased by 334,000 to 6.5M.

The labor force participation rate stayed at 62.5% for the 3rd consecutive month.

• Average hourly earnings increased slightly at 0.1% (5 cents).
• Average hourly earnings were 4.3% year-over-year.
• Average weekly hours worked increased by 0.2 hours to 34.3 hours per week.
• The number of hires remained steady at 5.7M. Total separations decreased slightly to 5.3M.
• Within the separations, quits decreased slightly to 3.4M, and layoffs and discharges changed little to 1.6M.

January job gains were revised down to +229,000 from +353,000. December was also revised down by 43,000 from +333,000 to +290,000.

Industry Trends:

Interesting Facts:

According to RSM Chief Economist Joe Brusuelas, with the downward revisions in December and January, the net gains are really +108,000. This is needed to keep employment stable and demonstrate to the central bank that the economy is not at risk of overheating. He also makes a case as to why inflation will decline to the Federal Reserve’s target of 2%.

Federal Reserve Chair Jerome Powell described the labor market as “relatively tight” but noted that “supply and demand conditions have continued to come into better balance.”

This latest report shows some softening in the labor market, which economists say was needed to build a base case for rate cuts in May or June.