US adds 275,000 jobs as unemployment stays below 4% for 25th month in a row

11 March 2024 , 16:18

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A construction worker looks up at the I-10 freeway, which was closed by fire last year. The US government has just issued its February jobs report (Image: Copyright 2023 The Associated Press. All rights reserved.)

The US job market has shown its strength with American employers adding 275,000 jobs in February, indicating the economy's ability to cope with high interest rates.

Job growth in February was higher than January's revised gain of 229,000 jobs. However, the unemployment rate rose slightly to 3.9% - the highest in two years but still low by historical standards. This marks the 25th month in a row where unemployment has stayed below 4%, the longest streak since the 1960s.

Despite lower inflation, a healthy job market and a record-high stock market, many Americans are unhappy with the economy. This could affect President Joe Biden's chances of re-election. Many voters blame him for the rise in consumer prices that started in 2021.

Even though inflation has eased, average prices are still about 17% higher than three years ago. There was some good news for those fighting inflation. Average hourly wages only increased by 0.1% from January, the smallest monthly gain in over two years, and 4.3% from a year earlier, less than expected.

Average pay growth has been outpacing inflation for more than a year, but if it rises too quickly, it can fuel inflation. The latest figures show that the job market has been able to cope with the 11 rate increases imposed by the Fed in its fight against inflation, which made borrowing more expensive for households and businesses.

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Companies have continued to hire quickly to meet steady demand from customers across the economy. The numbers for February will likely make Fed officials feel more at ease about reducing rates in the coming months.

With job gains for December and January being revised down significantly, wage growth slowing and the unemployment rate increasing, the Fed's policymakers are unlikely to be concerned about an overheating economy.

Most economists and Wall Street traders predict the first rate cut will happen in June. The Fed stopped increasing rates in July and has indicated that it plans three rate cuts this year. The unemployment rate increased last month partly because more people started looking for work and didn't find one straight away.

The influx of job seekers could reassure the Fed, as it usually makes it easier for companies to fill jobs without having to raise pay significantly. Gus Faucher, chief economist at PNC Financial Services, said he was impressed by the range of hiring last month.

Among industries, health care companies added 67,000 jobs, government at all levels 52,000, restaurants and bars 42,000, construction companies 23,000 and retailers 19,000. When the Fed started to increase rates quickly in March 2022 to tackle the worst inflation in 40 years, many people thought a tough recession would follow. This could have led to lots of job losses and high unemployment. The Fed raised its main rate to the highest level in over 20 years.

However, inflation has been going down steadily since then: Consumer prices in January were only 3.1% higher than a year before - much lower than the peak of 9.1% in 2022 and getting closer to the Fed's target of 2%. Unemployment is still low and there doesn't seem to be a recession coming.

This mix of lower inflation and strong hiring is making people hopeful that the Fed can achieve a "soft landing". This means they can control inflation without causing a recession.e changes, job growth has averaged a strong 265,000 over the past three months.

Lawrence Matheson