Job growth sets stage for rate hike
Analysts expect action next week at Federal Reserve meeting.
Even the weather cooperated. Pretty much all the ingredients needed for a rousing display of labor market strength lined up in February, with gains in payrolls, wages and the size of the overall workforce.
The strong monthly jobs report on Friday — representing President Donald Trump’s first full month in office — should sweep away any last-minute reservations harbored by Federal Reserve policymakers about raising the benchmark interest rate when they meet next week.
“The economy is riding a wave of bullish sentiment postelection,” said Andrew Chamberlain, chief economist at Glassdoor, a career website. “We’re seeing strong labor demand across the board and no sign of slowing right now.”
With the Labor Department reporting a gain of 235,000 jobs for the month, Republicans and Democrats quickly jostled for credit.
Sean Spicer, the White House press secretary, said of Trump, “He’s jump-started job creation, not only through his executive
action but because of the surge in economic confidence and optimism that has been inspired since his election.”
Trump, who, as a candidate, repeatedly dismissed the official jobs reports as phony, reposted a comment on Twitter from the conservative website Drudge Report that said, “GREAT AGAIN: +235,000.” Spicer later quoted Trump on his faith in the report: “They may have been phony in the past, but it’s very real now.”
The Republican self-congratulation clearly irked Democrats. Tom Perez, labor secretary in the Obama administration and now chairman of the Democratic National Committee, countered that Trump had “absolutely nothing” to do with the job gains.
“Trump inherited an economy from Barack Obama with the longest streak of private sector job growth in history,” he said.
The Labor Department repeated that it had not changed the way it collected and analyzed jobs data since Trump took office.
“It’s business as usual,” said Megan Kindelan, director of public affairs at the Bureau of Labor Statistics.
Although the economic anxiety that helped put Trump in the White House remains, the official jobless rate is near what the Fed considers full employment — a threshold where, in theory at least, everyone who wants a job at the going rate can find one. The official jobless rate fell to 4.7 percent, from 4.8 percent in January.
At the same time, jobless claims are near a 44-year low and the stock market is surging. Revisions to January’s estimates raised the threemonth average of monthly job gains to 209,000 and annual wage growth to 2.8 percent, further bolstering the case for those who argue the economy is strong enough to withstand a rate increase.
The overall economic momentum received a push from February’s unusually warm weather, with almost a quarter of the new jobs — about 58,000 — coming from construction. Manufacturing and mining rose too.
Also significant was the increase in the labor participation rate to 63 percent, a result of rising employment even among people without a high school diploma.
“There’s got to be some optimism that these people are feeling they finally have a chance,” said Diane Swonk, founder and chief executive of DS economics in Chicago.
On the other end are employers who are seeing acute labor shortages.
“They’re offering training programs now,” Swonk said. “They’re complaining about it. But that’s what tight labor markets do. It forces you to invest more to work with less.”
Bigger paychecks are something that most Americans, after years of stagnant wage growth, are particularly eager to see. The Fed, too, has been waiting for an increase, but it is also wary of wages rising too fast. The board’s members want to head off incipient inflation without putting the brakes on hiring, especially because the benefits of the 8-year-old recovery have been so unevenly distributed.
At the same time, a broader measure of unemployment — which includes the millions of Americans who have given up looking for work altogether or are working part time but would prefer full-time jobs — dropped to 9.2 percent last month but is still high given how tight the labor market looks otherwise.
Although the Trump White House has had little time to make any substantial policy changes, anticipation of a rollback in taxes and regulations and the possibility of vast infrastructure spending has created optimism among employers and blue-collar workers.
Trump’s promises of 4 percent economic growth and millions of new jobs face potential headwinds, though. Dissension among Republicans and the unpredictability of Trump’s course in several policy areas could dampen job growth.
The future of the health care law and a possible replacement is making hospitals and community health centers cautious about adding workers.
And a strong dollar and a potential backlash against the White House’s travel ban could slow tourism and hiring in the sector.
Trump’s across-the-board hiring freeze on federal government jobs, combined with declines at the state level, is likely to contain the number of public sector employees.
The uncertainty extends to prospects for tax cuts.
Some Wall Street analysts, expecting delays, have pared their growth forecasts for 2017, after recently raising them.