What were the employment trends in February?
The February jobs report continued January’s trend of better than expected payroll growth. While the 275,000 jobs added in February fell short of January’s original blockbuster 353,000 figure, the January data was revised down to 229,000, so February hiring did show an uptick from the revised figure. February job gains also exceeded the 230,000 monthly average for the previous 12 months and were most notable in health care, government, food services & drinking, social assistance, and transportation & warehousing. Unemployment increased to 3.9%, its highest level since January 2022, but still below the full employment rate of 4 percent. Taken together, the data point to a still healthy jobs market, but less risk of overheating.
What else do we know about today’s job market?
Other labor market data out this week show similar trends back to normal. In January, job openings were essentially unchanged at 8.9 million, down from 10.4 million the prior year. The job openings rate was also steady over the month at 5.4%. Job quits held steady at 3.4 million while the rate shrank to 2.1%. While openings remain elevated, quits levels and rates are within pre-pandemic range.
What does today’s data mean for the monetary policy?
At January’s Fed meeting, no rate change was announced, as the Fed sought additional confidence that inflation is on a path to its 2% target. Following that meeting, inflation surprised to the high-side, kicking off a wave of concern that Fed rate cuts would be delayed. This also sparked increases in longer-term interest rates, including mortgage rates. Steadiness in the labor market has increased the Fed’s attention on the price stability side of the dual mandate. This means next week’s inflation data is an important signal for what’s ahead and whether the first Fed rate cut will be in June or later in the year.
What does today’s data mean for homebuyers and sellers and the housing market?
Average hourly earnings for private employees grew by 4.3% in February. With inflation running at 3.1% in January, this means that workers have once again seen real growth in their spending power over the last year. However, the cost of buying a home has still outpaced wage growth, rising 5.4% in February. One key to bringing down housing and rent costs is adding more homes to the market. Realtor.com’s analysis of housing supply and household formation suggests that the U.S. has built between 2.5 and 7.2 million fewer homes than households over the last decade. Adding more housing would alleviate cost-pressure on one of the biggest budget items for families, taking the pressure off of inflation.
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