Economy Added Back 678,000 Jobs As Unemployment Rate Ticked Down To 3.8%

Topline

The U.S. added back a surprisingly strong 678,000 new jobs in February, performing much better than experts were expecting in a report that’s likely to encourage the Federal Reserve to pursue more aggressive interest rate hikes despite intensifying economic uncertainty stemming from the conflict between Russia and Ukraine.

Key Facts

February’s job gains were significantly better than the roughly 440,000 new jobs economists had forecast, according to data released Friday by the Labor Department, and also far exceeded the 481,000 jobs added by the economy in January.

The unemployment rate ticked down to 3.8%, compared to 4% in January, matching its lowest point in more than a year and edging closer to pre-pandemic levels of 3.5%. 

Job growth was widespread, led by gains in leisure and hospitality, healthcare, and construction, the government said.

What To Watch For

The U.S. economy is on track to recoup the 22 million jobs lost during the pandemic recession by late this year, Moody’s Analytics Chief Economist Mark Zandi wrote in a research note last week, pointing out the milestone would likely not have been achieved until 2026 without the U.S. government’s fiscal stimulus measures.  However, the unprecedented level of government spending has fueled a decades-high surge in inflation, with prices rising 7.5% in the 12 months ending in January, the biggest increase since February 1982. Federal Reserve officials will dissect this month’s jobs report before their next policy meeting begins on March 15, when they’re expected to embark on an interest rate hiking cycle to combat rising prices.

Crucial Quote

“Aside from the obvious heartbreaking details, Russia’s war against Ukraine has injected economic developments, including downside risks,” Bankrate Senior Economic Analyst Mark Hamrick said in emailed comments Friday. “If they weigh on the consumer, that can affect the health of the job market even as the economy reopens as Covid trends relent.”

Tangent

The stock market logged a dismal start to the year after the Fed revealed in January it would move more aggressively than previously expected to hike interest rates in a fight against inflation, with Russia’s invasion of Ukraine only adding to economic uncertainty in recent weeks. “Although financial conditions have only tightened somewhat since the start of the conflict, we see potentially large downside growth risks if tighter sanctions or an escalation in the conflict leads to a broader global slowdown that spills over to the U.S.,” Goldman Sachs Chief Economist Jan Hatzius wrote in a Thursday evening note to clients. After climbing 27% in 2021, the S&P 500 is down 9% this year.

Further Reading

U.S. Added Back 467,000 New Jobs In January—But Unemployment Rate Ticked Up To 4% (Forbes)