by Job creation slowed in February but was still stronger than expected despite efforts by the Federal Reserve to slow the economy and reduce inflation.
Nonfarm payrolls rose 311,000 for the month, the Labor Department reported Friday. That was above the 225,000 Dow Jones estimate and a sign that the job market is still hot.
The unemployment rate rose to 3.6%, above the expectation of 3.4%.
There was some good news on the inflation side, as average hourly earnings rose 4.6% from a year earlier, below the 4.8% estimate. The 0.2% monthly increase was also below the 0.4% estimate.
Although the number of jobs was stronger than expectations, February’s growth represented a slowdown from an unusually strong January. The year opened with a nonfarm payroll gain of 504,000, a total that was revised slightly downward from the 517,000 initially reported. The December total was also down slightly, at 239,000, a decrease of 21,000 from the previous estimate.
Actions were mixed after the release, while Treasury yields were mostly lower.
Leisure and hospitality led gains, rising 105,000, almost in line with the six-month average of 91,000. Retail trade saw a gain of 50,000, government added 46,000, and professional and business services saw an increase of 45,000.
Information-related jobs fell 25,000, while transportation and warehousing lost 22,000 jobs in the month.
The jobs report comes at a critical time for the US economy and consequently for Fed policymakers.
Over the past year, the central bank has raised its benchmark interest rate eight times, pushing the federal funds rate to a range of 4.5% to 4.75%.
With inflation data appearing to cool towards the end of 2022, markets expected the Fed, in turn, to slow its rate hikes. That happened in February, when the Federal Open Market Committee approved a 0.25 percentage point increase and indicated that smaller increases would follow in the future.
However, Fed Chairman Jerome Powell told Congress this week that recent metrics show inflation has risen again and, if that continues to be the case, he expects rates to rise to a higher level of what was previously expected. Powell specifically pointed to the “extremely tight” labor market as a reason why rates are likely to continue to rise and remain elevated.
He also indicated that the increases could be higher than the February rise.
Although Powell emphasized that no decision has been made for the March FOMC meeting, markets backed down on his comments. Stocks sold off sharply and the gap between 2-year and 10-year Treasury yields widened, a phenomenon known as an inverted yield curve that has preceded every post-World War II recession.
