Hiring Surges But Wage Growth Cools; Dow Jones Falls

The US economy added back 678,000 jobs in February, far better than the consensus, as the fading of the omicron wave revived the service sector. The unemployment rate fell to 3.8%. The Dow Jones fell Friday after the jobs report, pressured by Russia’s intensifying attack on Ukraine.




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Private-sector payrolls rose 654,000 in February, while government jobs rose 24,000.

Wall Street had expected the February jobs report to show a gain of 390,000 jobs, including 330,000 in the private sector. Economists expected the unemployment rate to ease to 3.9%.

The average hourly wage was basically flat on the month, while rising 5.1% from a year ago, far below expectations of 5.8% annual wage growth. January’s annual wage gain was revised down to 5.5% from 5.7%. Even so, January’s growth was artificially inflated by a drop in hours worked among modest-wage service jobs, as omicron surged. As their hours recovered, overall wage gains moderated.

While wage gains are still strong, they’re not keeping up with inflation, which hit 7.5% in February.

Job gains for December and January were revised up by 92,000. The initially reported gain of 467,000 jobs in January was revised to 481,000.

Omicron cases fell to about a 175,000 daily pace in mid-February, as the Labor Department conducted its mid-month household and employer surveys, down from 800,000 in mid-January. The pace has since fallen close to 50,000 and the labor market appears to be showing further progress. Initial jobless claims spiked to 290,000 in the week through Jan. 15, but fell to 215,000 in the week through Feb. 26.

Dow Jones, Treasury Yields React To Jobs Report

After the jobs report, the Dow Jones fell 0.5% in Friday’s stock market action. The S&P 500 lost 0.8% and the Nasdaq composite 1.7%.

The jobs report is unlikely to substantially shift expectations for the Federal Reserve to hike its benchmark interest rate a quarter point at its March 15-16 meeting. However, pressure will remain on the Fed to keep hiking. Russia’s invasion has exacerbated commodity-price inflation, and a tight labor market gives workers leverage to push for raises to offset inflation. February’s jump in labor force participation, however, will be an encouraging sign for policymakers that workers sidelined during the pandemic may come back in greater numbers.

The major indexes have climbed off lows hit as Russia invaded Ukraine on Feb. 24, but the stock market has yet to shake off the correction.

On Thursday, the Dow Jones finished 8.2% below its all-time closing high on Jan. 4. The S&P 500 has fallen 9% from its peak close on Jan. 3. The Nasdaq has underperformed, sliding 15.7% from its Nov. 19 peak, as growth stock valuations have been crimped by rising interest rates.

The 10-year Treasury yield fell 12 basis points on Friday to 1.72%. It plunged 26 base points for the week.

Be sure to read IBD’s The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.

Jobs Report Details

The leisure and hospitality sector added 179,000 jobs. Factory employment grew by 36,000.

Construction jobs rose by 60,000. Health care and social assistance payrolls rose 94,000. Retailers added 37,000 jobs.

Unemployment

The household survey, which is used to derive the unemployment rate, showed the ranks of the employed rising by 548,000. The number of people participating in the labor force, meaning they are working or actively looking for a job, rose 304,000.

The share of the working age population (age 16 and up) participating in the labor force held edged up to 62.3%, matching expectations.

According to the monthly survey of households, 6.3 million Americans are unemployed, up from 5.8 million in February 2020.

Please follow Jed Graham on Twitter @IBD_JGraham for coverage of economic policy and financial markets.

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