U.S. employers extended a healthy streak of hiring in February by adding 295,000 jobs, the 12th straight monthly gain above 200,000. It was the latest sign that the U.S. economy is further strengthening and outpacing other major economies around the world.
The unemployment rate fell to 5.5 percent from 5.7 percent, the government said Friday. But the rate declined mainly because some people out of work stopped looking for jobs and were no longer counted as unemployed.
February’s robust job gain wasn’t enough to boost wages by much. The average hourly wage rose just 3 cents to $24.78 an hour. Average hourly pay has now risen just 2 percent over the past 12 months, barely ahead of inflation.
Still, over that time, 3.3 million more Americans have gotten jobs. More jobs and lower gas prices have led many consumers to step up spending. That’s boosting the economy, offsetting sluggish economies overseas and giving employers the confidence to hire.
Friday’s figures provide “more evidence that the labor market is recovering rapidly, with employment growth more than strong enough to keep the unemployment rate trending down,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics. Falling unemployment “makes more acceleration in wages increasingly likely.”
At 5.5 percent, the unemployment rate has now reached the top of the range the Federal Reserve has said is consistent with a healthy economy. That could make it more likely that the Fed will act soon to raise interest rates from record lows as early as June.
“This is quite a symbolic change that increases the pressure on the Fed to hike rates in June,” said Paul Dales, an economist at Capital Economics said.
Indeed, after the jobs report was released Friday morning, investors sold ultra-safe U.S. Treasurys, a sign that many anticipate a Fed rate hike. The yield on the 10-year Treasury note rose to 2.2 percent from 2.11 percent before the report was issued.
Investors also sold stocks. The Dow Jones industrial average dropped 64 points in morning trading.
Last month’s hiring was broad-based. Some of the industries with the biggest job gains include mostly low-paid work: Hotels and restaurants added 60,000 jobs, and retailers gained 32,000. But higher-paying fields also added jobs: Professional and business services, which include accountants, engineers and lawyers, gained 51,000, construction 29,000 and financial services 10,000.
The U.S. job market and economy are easily outshining those of other major nations. Though Europe and Japan are showing signs of growing more than last year, their economies remain feeble. The euro currency union’s unemployment rate has started to fall, but at 11.2 percent it remains nearly twice the U.S. level.
The U.S. economy expanded at a breakneck annual pace of 4.8 percent in last year’s spring and summer, only to slow to a tepid 2.2 percent rate in the final three months of 2014. Many economists estimate that growth is picking up slightly in the current quarter to an annual rate of 2.5 percent to nearly 3 percent.
Still, economists remain bullish about hiring despite the slowdown in growth. The fourth quarter’s slowdown occurred largely because companies reduced their stockpiles of goods, which translated into lower factory output.
But companies focus more on consumer demand in making hiring decisions, and demand was strong in the October-December quarter. Americans stepped up their spending by the most in four years.
And though consumers are saving much of the cash they have from cheaper gas, spending in January still rose at a decent pace after adjusting for lower prices.
Mark Zandi, chief economist at Moody’s Analytics, expects the economy to grow 3 percent this year, which would be first time it’s reached that level in a decade. That’s fast enough to support hiring of about 250,000 a month, he said.
The steady hiring may also finally be forcing wages up. Average hourly earnings rose 0.5 percent in January, the most in six years. Economists did caution against reading too much into one month’s figure. Most expect a more modest average wage gain in February.
March 6, 2015