US jobs growth slowed in February from the breakneck pace of the previous month, but remained elevated enough to keep pressure on the Federal Reserve to consider switching back to bigger interest rate increases.
The world’s largest economy added 311,000 jobs last month, higher than the 225,000 jobs forecast by economists but less than January’s downwardly revised 504,000 positions. Despite those gains, the unemployment rate inched up to 3.6 per cent, still near a multi-decade low.
Wage growth, meanwhile, increased 0.2 per cent from January, just shy of the previous monthly uptick in average hourly earnings. On a year-over-year basis, it is higher by 4.6 per cent.
February’s report, released by the Bureau of Labor Statistics on Friday, is one of the most consequential data releases ahead of the Fed’s next policy meeting on March 21-22.
In congressional testimonies this week Fed chair Jay Powell said the central bank would be scrutinising the figures — alongside inflation and retail sales figures, among others, due next week — in order to determine whether to resume more aggressive rate rises after a deluge of unexpectedly strong data.
“They’re going to be very important in our assessment of the higher readings that we have very recently received and of the overall direction of the economy and of our progress in bringing inflation down,” he said on Wednesday, stressing that no decision had yet been made. Powell added that “the ultimate level of interest rates is likely to be higher than previously anticipated”.
In February, the Fed called time on jumbo rate rises and delivered a more traditional quarter-point increase, having repeatedly moved in half-point and three-quarter point intervals last year. At the time Powell justified the smaller rate rise by arguing that it would “better allow” officials to track progress in their goal to tame inflation and said the “disinflationary process” was under way.
But persistent labour market tightness and renewed consumer strength since then have upended expectations about the path forward for policy. Any inkling that January’s data was not a one-off will probably prompt the Fed to opt for the larger increase, economists warn.
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