Mixed Signals: US Payrolls Top Estimates, Wages Cool

By Reade Pickert

US payrolls rose in February by more than expected while a broad measure of monthly wage growth slowed, offering a mixed picture as the Federal Reserve considers whether to step up the pace of interest-rate hikes.

Nonfarm payrolls increased 311,000 after a 504,000 advance in January, a Bureau of Labor Statistics report showed Friday. The unemployment rate ticked up to 3.6% as the labor force grew, and monthly wages rose at the slowest pace in a year.

Photo by Tima Miroshnichenko: https://www.pexels.com/photo/a-woman-in-plaid-blazer-using-her-laptop-and-mobile-phone-6693656/

The payrolls figure topped all but one estimate in a Bloomberg survey of economists, which called for a 225,000 increase and for wages to rise 0.3% from the prior month. US payroll growth has exceeded expectations for 11 straight months, extending the longest streak in data compiled by Bloomberg back to 1998.

Average hourly earnings climbed 0.2% from a month earlier and 4.6% from a year ago. That said, wages for production and nonsupervisory workers — which make up the majority of US workers and aren’t in management positions — advanced 0.5%, the biggest gain in three months and primarily driven by service industries.

The S&P 500 opened lower, Treasuries rallied and the dollar fell as investors judged the report would push Fed policymakers toward a quarter-point hike at the next meeting later this month, rather than the half-point move that Chair Jerome Powell put on the table in congressional testimony this week.

Traders also weighed the latest news on SVB Financial Group and what its crisis means for the broader financial sector.

What Bloomberg Economics Says…

“The topline print exceeded expectations by so much that it clears the way for the Fed to follow through with a 50-bp hike – despite several signs of softening in the report, such as reduced work hours and a slowdown in average hourly earnings growth.”

— Anna Wong, Stuart Paul and Eliza Winger, economists

The labor force participation rate — the share of the population that is working or looking for work — rose to 62.5%, the highest since March 2020. For those ages 25 to 54, the rate jumped to the highest since before the pandemic.

The report points to a still-tight job market, where hiring needs exceed the number of available workers. However, if sustained, improved labor supply and easing wage growth in some sectors should help the Fed in its goal to curb inflation.

Employers are also reticent to dismiss the staff they’ve struggled to attract and retain, helping to keep unemployment near historically low levels and giving many Americans the wherewithal to keep spending.

Powell has said a move to a faster pace would be based on the “totality of the data,” which also includes next week’s inflation reports. The mixed news from the jobs report will likely put even more emphasis on the consumer price index out Tuesday ahead of the Fed’s March 21-22 meeting.

Furthermore, policymakers will need to weigh the implications of its aggressive tightening on a financial system that’s showing signs of stress — evidenced by growing concerns about the stability of Silicon Valley Bank.

Read more: SVB in Talks to Sell Itself After Capital Raise Fails, CNBC Says

The job gains were led by leisure and hospitality, retail trade, government and health care. Employers shed jobs in information — which includes many tech jobs — as well as transportation and warehousing.

While job cuts at big-name companies like Amazon.com Inc. and Citigroup Inc. have made headlines, they’ve largely been contained to technology, finance and housing. That said, there are early signs that layoffs may be beginning to spread. Data from Challenger, Gray & Christmas Inc. showed February job-cut announcements were five times the number in the same month last year.

Another potential sign of softening in the labor market is the step down in the average workweek. Employers tend to cut hours before staff when demand wanes.

–With assistance from Augusta Saraiva and Chris Middleton.

(Updates with market open)

More stories like this are available on bloomberg.com

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