The economy added a solid 311,000 jobs in February, well-above economists’ expectations of 205,000.
February’s job gains are another sign the labor market is hotter than many expected going into 2023 and that January was not an anomaly.
For those hoping the Federal Reserve slows the pace of interest rate hikes, February’s report is not good news.
The 311,000 jobs added by employers in February show businesses remain confident in adding new positions and backfilling open roles. February’s net job gains are considerably lower than January’s 504,000, but they’re above the pre-pandemic average of 200,000 jobs added per month.
Job gains for both December and January were revised downward by a total of 34,000, but the labor market remains incredibly hot.
Demand for Workers Remains Strong
The Federal Reserve has increased interest rates at an unprecedented pace in an attempt to lower labor demand and stem record inflation, but this February’s report indicates businesses are still hiring at an accelerated pace. The labor market is among the tightest in history, and the competition for talent remains fierce.
Job openings are a key indicator of labor demand. And January’s job openings reported earlier this week, showed few signs that companies are letting up in terms of hiring plans. Job openings decreased slightly to 10.8 million, still much higher than the 2015 to 2019 average of 6.4 million monthly job openings.
As demand for workers starts to moderate, we’d expect record wage growth to ease. However, February’s jobs report shows that 12-month wage growth increased from 4.4% to 4.6%.
Layoffs Remain Near Historic Lows
Hiring is still strong, and layoffs have not increased at the pace many projected. While there have been many high-profile layoffs, the number ticked up slightly month-over-month to 1.7 million in January, edging closer to the 1.9 million monthly average layoffs before the pandemic.
And the unemployment rate ticked up to 3.6%, above pre-pandemic lows. With 10.8 million job openings, and fewer than 6 million unemployed workers available to fill those open roles, there are nearly two open jobs for each unemployed worker.
Another strong jobs report after January’s shocking gains could be a sign that the job market will stay heated with competition for talent.
Companies will need to watch the labor market and track compensation trends closely this year to stay competitive.