US Jobs Report Comes Up Favorable For Fed

The US economy added a consensus-topping 311,000 jobs in February, the government said Friday.

Economists expected 225,000 from the world’s most important macro print. The range of estimates was 80,000 to 325,000, so this was yet another example of a report which easily exceeded the expectations of those anticipating a marked slowdown.

Revisions subtracted a mostly inconsequential 13,000 from January’s blockbuster headline, and took 21,000 from December.

The solid read on hiring was juxtaposed with the largest increase in weekly jobless claims since October, and data showing layoff announcements running at the swiftest pace since 2009.

Private payrolls notched a 265,000 gain for February, ahead of estimates and consistent with Wednesday’s ADP report. The household survey showed a 177,000 gain.

Job gains were broad-based, with leisure and hospitality leading the way, followed by retail, government and health care. Employment declined in information and also in transportation and warehousing. Manufacturing shed jobs at the margins. Other than that, there was scant evidence to suggest you’d have a hard time finding a job in the (apparently still unlikely) event you want one.

There was some “good” news for the Fed and thereby for markets, although investors were preoccupied on Friday with the fallout of a burgeoning bank run.

Average hourly earnings grew just 0.2% from January, less than the 0.3% consensus expected. That contrasts with ADP’s warning on hot pay growth and should be greeted by policymakers as evidence, however tentative, of moderating wage pressure. On a YoY basis, average hourly earnings grew a below-consensus 4.6%.

The unemployment rate, which nearly notched a 70-year low in January, ticked up to 3.6%. That too will cheer the Fed, even as Elizabeth Warren won’t be amused.

Better still, the participation rate rose. Not by much, but at 62.5%, it was the highest of the pandemic era.

The market should like this report. There was nothing that stuck out as arguing loudly for a resumption of 50bps rate hikes from the Fed, and headline jobs growth remained strong, all “backward-looking,” “lagging indicator” caveats aside.

At the least, bets for a 50bps re-escalation at this month’s FOMC meeting should come off, and the Fed can find some solace in the favorable optics around the uptick in participation and the auspicious-looking combination of a cool MoM read on hourly earnings but a still robust YoY pace which, with any luck, will soon be at least even with CPI.