In February, American employers continued their streak of robust hiring, surprising economists by adding 275,000 jobs, according to the latest report released by the US Labor Department. This figure marked an increase from the revised gain of 229,000 jobs in January, showcasing the resilience of the US economy in the face of high interest rates.
Despite the encouraging job growth, the unemployment rate ticked up slightly to 3.9% in February, the highest rate in two years. However, it's important to note that this rate remains low by historic standards, marking the 25th consecutive month with joblessness below 4% — the longest such streak since the 1960s.
While inflationary pressures have significantly eased, many Americans express dissatisfaction with the state of the economy. This sentiment may impact President Joe Biden's bid for re-election, with voters attributing the surge in consumer prices to his administration's policies.
The report also provided encouraging news for inflation fighters at the Federal Reserve. Average hourly wages rose just 0.1% from January, the smallest monthly gain in over two years, and 4.3% from a year earlier, which was less than expected. This moderation in wage growth, coupled with lower inflation and a healthy job market, may pave the way for rate cuts by the Fed in the coming months.
Despite concerns about a potential recession when the Fed began aggressively raising rates in March 2022, the combination of easing inflation and steady job growth is raising hopes for a "soft landing" scenario. This would involve taming inflation without causing a recession, a scenario consistent with the latest job market figures.
Gus Faucher, chief economist at PNC Financial Services, expects the job market to cool down slightly, with average monthly job growth decelerating to around 150,000 and the unemployment rate rising slightly above 4% by the end of the year. This cooling labour market could prompt the Fed to start cutting rates in the spring.
However, challenges persist for employers, particularly in sectors experiencing labour shortages. Nicola Davies, who owns a small cleaning company in San Diego, struggles to find reliable help and may have to consider raising prices for her services.
Similarly, businesses like Lehigh Heavy Forge in Pennsylvania and Active Learning Centers in Allentown face difficulties in finding skilled workers and retaining them amid competitive wages offered by other sectors.
Despite these challenges, the tight job market has allowed workers like Elizabeth Toenyes to find jobs suited to their skills and preferences. Toenyes, a retired Army captain, found meaningful employment in public relations and now works from home, benefiting from flexible working conditions and productivity-enhancing tools.
