HomeContributorsFundamental AnalysisUS: Payrolls Surge in February, Unemployed Rate Narrows in on Pre-pandemic Low

US: Payrolls Surge in February, Unemployed Rate Narrows in on Pre-pandemic Low

The U.S. economy gained an impressive 678k jobs in February, on top of an upward revision to the prior two months totaling +92k. Payrolls are still 1.4% below their pre-pandemic level, or about 2.1 million jobs. The unemployment rate fell to 3.8% — a new post-pandemic low.

All major industries saw job growth in February. Employment rose 179k in the hard-hit leisure and hospitality sector, where employment remains 9% below February 2020 levels (1.5 million jobs). Gains were also seen in professional and business services (+95k), health care (+64k), construction (+60k), retail (+37k), transportation and warehousing (+48k), manufacturing (+36k), financial services (+35k), social assistance (+31k), other services (31k), wholesale trade (+18k) and mining (+9k).

The unemployment rate fell as 548k more people got jobs, outstripping a solid 304k gain in the labor force. The participation rate ticked up slightly from 62.2% to 62.3%. The number of unemployed fell to 6.3 million, now only 600k higher than February 2020. The number of people not in the labor force who currently want a job also fell to 5.4 million, up 400k versus pre-pandemic levels. At the current pace of employment growth it would only take a couple of months to take up the remaining slack in the labor market as measured by the household survey.

Average hourly earnings were up 5.1% from a year ago in February, down from 5.7% in January. February’s pace was likely biased upwards by lower average hours.

Key Implications

Payrolls impressed once again in February. With the unemployment rate getting very close to its pre-pandemic low of 3.5%, the labor market is getting tighter and tighter. It is certainly tight enough for the Fed to take interest rates higher. At the current rate of job creation, it will not take long for the labor market to re-attain its pre-pandemic vigor.

The knock-on economic impacts of Russia’s invasion of Ukraine, are likely to exert an economic drag on the U.S. economy. Most obviously through higher prices for energy (among other goods). With substantial excess savings, and strong income growth, consumers are in a good position to absorb higher prices, but they will still weigh on economic activity. Alongside greater risk aversion and tighter financial conditions, this could result in fewer Fed hikes in the coming quarters than markets had been expecting prior to the war.

TD Bank Financial Group
TD Bank Financial Grouphttp://www.td.com/economics/
The information contained in this report has been prepared for the information of our customers by TD Bank Financial Group. The information has been drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does TD Bank Financial Group assume any responsibility or liability.

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