Mar 10, 2023 - Economy

February's jobs report is a crowd-pleaser

Illustration: Annelise Capossela/Axios

The February jobs report had something for everyone: encouraging developments for American workers and the Federal Reserve's inflation-fighting efforts.

Why it matters: Economists and data-watchers hoped the latest payrolls report would clear up the big question of the moment: Will more hot data force the Fed to tighten more aggressively?

  • The report doesn't settle the question one way or the other. Some details point to a job market still bursting at the seams, alongside others that suggest inflationary pressures are diminishing.

Details: January's fiery-hot jobs report showed that employers have an insatiable appetite for more staff. That's still the case — a welcome development for job-seekers.

  • Last month, employers continued to add staff at a rapid rate, with 311,000 overall positions. And revisions did not dramatically alter the picture for January or December.

Meanwhile, a surge of workers (roughly 270,000) re-entered the labor force last month, helping push up the unemployment rate slightly to 3.6%.

  • Notably, the labor force participation rate for prime-age workers (those between 25 and 54) is back at its pre-pandemic level of 83.1%.
  • That more workers are returning to the job market is good news, because it could help bring the labor market back into balance in a less painful manner. Employer demand for workers does not have to come down as much if more workers are available to meet said demand.

Between the lines: Wages are especially crucial for the inflation outlook, and there the news looks favorable. Average hourly earnings were up only 0.2% last month.

  • Over the last three months, they've risen at a 3.6% annual rate, down from 4.9% in the final months of last year. Slower wage growth should diminish price pressures.

What they're saying: "If you have a labor market that is showing less tightness on the labor force participation front, that will tend — all else equal — to put downward pressure on wage growth," Gregory Daco, chief economist at EY-Parthenon, tells Axios.

The bottom line: More job reports like the one in February could mean a more gradual labor market cooling that would be less painful for American workers.

  • Attention now turns to next week's Consumer Price Index report, which may hold more clues about inflationary pressures and could be the deciding factor on whether the Fed hikes by a quarter-point or half-point in 12 days.
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