Though all signs point to a cooling labor market overall, the economy picked up another 275,000 jobs in February. The jobs report on Friday is unlikely to convince the Fed that rate cuts are necessary when the Federal Open Markets Committee meets later this month, economists said.
Jobs increased by 275,000 in February, up from a revised rate of 229,000 in January, according to data released by the Bureau of Labor Statistics on Friday. February’s reading exceeded the average monthly gain of 230,000 over the prior 12 months.
The national unemployment rate ticked up for the first time in four months to 3.9%, its highest level since January 2022, but still below the full employment rate of 4%. The number of unemployed Americans also rose to 6.5 million.
“While unemployment is still low, the leverage held by workers is weakening,” Bright MLS chief economist Lisa Sturtevant said in a statement. “Job seekers are taking longer to find work, and the number of job switchers has declined.”
Job gains occurred mainly in health care, government, food services, social assistance, transportation and warehousing. Meanwhile, retail trade, mining, quarrying, oil and gas extraction, manufacturing, wholesale trade, information, and financial activities posted fewer jobs in February.
During his semiannual monetary policy testimony on Wednesday and Thursday, Federal Reserve Chair Jerome Powell reiterated that the Fed sees no urgency to cut rates just yet. Powell stressed that the Fed needs more assurance that inflation is on a sustainable path toward its target before making any moves.
Average hourly earnings for private-sector employees grew by 0.1% month over month to $34.57 and were up 4.3% from a year ago. In February, employment continued to trend up in construction, adding 23,000 jobs month over month. Job openings were essentially unchanged at 8.9 million at a rate of 5.4%, down from 10.4 million the prior year. Meanwhile, job quits remained steady at 3.4 million while the rate shrank to 2.1%.
The jobs report contains two conflicting implications for the housing market, according to Sturtevant.
On the one hand, the rising uncertainty among businesses and workers caused by high-interest rates could also make home shoppers wearier about making big financial decisions. On the other hand, a cooling job market could give the Federal Reserve the signal it needs to cut interest rates sooner rather than later.
“It is still likely to be summer before the first Fed rate cut,” Sturtevant said. “However, the economic data we’re seeing now could cause the market to react, anticipating future Fed action, which could lower borrowing rates, including mortgage rates. Lower rates this spring could give housing market demand a boost.”
Lawrence Yun, the chief economist at the National Association of Realtors, said the economy is clearly slowing and the housing crisis grows more acute each month.
“The short-term timing of purchase is dependent upon mortgage rates and inventory availability,” he said. “Home sales recorded the lowest activity in 2023 in nearly 30 years. Note that there are 158 million payroll jobs today compared to 117 million when home sales were similarly low. It implies sizable potential real estate demand on the sidelines, ready to pounce once short-term conditions move favorably.”
