What February's Huge Jobs Gain Says About the U.S. Economy, and Your Pay

The Labor Department released its latest hiring and unemployment figures Friday morning, providing one of the better snapshots of the state of the U.S. economy.The numbers313,000 jobs were added last month. Economists had anticipated a gain of about 200,000.The unemployment rate was 4.1 percent, the same as in January.The average hourly wage grew by 0.1 percent. It grew by 0.3 percent in January.The takeawayWith President Donald Trump's move to put tariffs on steel and aluminum imports and growing talk of a trade war, February's numbers could establish a baseline to measure the impact of trade restrictions and retaliation over the coming months.This report also clears the way for the Federal Reserve Board to raise the benchmark interest rate when it meets this month under its new chairman, Jerome H. Powell.Job growth has been consistently strong. Even before this latest report, the three-month average job growth was roughly 200,000 a month. At the same time, other information released by the government this week showed initial jobless claims still near their lowest level in almost 50 years, suggesting layoffs are down and employers are trying to hold on to their workers.That is why the wage figures are likely to have the greatest sway with the Fed. "There's one really big story here, and that's the average hourly earnings," said Jonathan Golub, chief U.S. equity strategist at Credit Suisse.The jump in January -- which pushed the year-over-year figure to 2.9 percent, from 2.3 percent just three months earlier -- was cited as a cause of a market sell-off.While the signs of stronger wage growth have been welcomed by workers, they have fueled inflation worries on Wall Street and speculation that the Fed might raise rates at least four times this year, rather than the three increases expected. "That's where the conversation will turn," Golub said.Ellen Zentner, chief U.S. economist at Morgan Stanley, agreed. The January report was "a pretty positive backdrop for household income, in stark contrast to last year, when wage growth was stagnant and income growth was slowing on a year-over-year basis." Still, she added, it "reset expectations that we are in an environment where the labor market is tighter and inflation is more likely."Inflation fears would be dampened if productivity numbers were to rise more sharply. When that happens, companies can pay workers more without eating into their bottom lines. But if productivity doesn't improve, competition that drives up wages would end up trimming corporate profits.While some companies have prominently announced worker bonuses this year after the signing of the tax bill, those kinds of rewards -- as opposed to pay raises -- are not counted in the average hourly wage calculations by the Bureau of Labor Statistics.  Continue reading...