US job gains accelerate while wage growth slows sharply

Washington

Robust US hiring momentum carried on in February and wage growth slowed, adding to inflationary pressures that are already dogging the economy and putting the Federal Reserve on track to raise interest rates this month.

Nonfarm payrolls increased 678,000 last month after an upwardly revised 481,000 gain in January, a Labor Department report showed Friday.

The advance was broad-based across sectors. The unemployment rate edged down to 3.8 per cent, and average hourly earnings were unchanged from the prior month.

The median estimate in a Bloomberg survey of economists called for a 423,000 advance in payrolls and for the unemployment rate to fall to 3.9 per cent.

The employment report - the last the Federal Reserve will receive before its Mar 15-16 meeting - highlights a steadily improving, though extremely tight labour market.

"They are going to pursue a dovish hike rate this month, nothing that could come back to haunt them due to the geopolitical situation," said Peter Cardillo, chief market economist, Spartan Capital Securities, New York.

"The key now is the price of oil. If the price of oil should continue to rise, then the Fed is going to have to get more aggressive. Commodity inflation could reach a point where it could be damaging to economic growth."

While declining Covid cases and looser restrictions likely helped boost hiring, employers are still scrambling to fill a near-record number of vacancies, making it tough to meet resilient demand by households and businesses alike.

"Already there are concerns with the Ukraine crisis and this would've put additional pressure under the Fed to be more aggressive because of the number of jobs being added and unemployment rate coming down that could put more upward pressure on wage growth.

"But, because the average hourly earnings actually came in lower than expected it has caused investors to breathe a sigh of relief," said Sam Stovall, chief investment strategist, CFRA Research, New York. BLOOMBERG