The economy gained 311,000 jobs in February, more than expected, another sign that the Federal Reserve’s interest rate hikes have still not substantially harmed the strong labor market.
The new figures reported by the Bureau of Labor Statistics Friday morning provide reassurance about the strength of the economy. The unemployment rate ticked up to 3.6%, still a low figure by historical standards.
The stronger jobs report shows that the central bank’s rate hikes aren’t yet having the punch officials hoped and could cause the Fed to lean toward a more aggressive monetary stance at its meeting later this month.
“It’s stronger than expected, although, on a positive note, the unemployment rate edged up … which places the Fed in somewhat of a quandary — what to do next,” Brian Marks, executive director of the University of New Haven’s Entrepreneurship and Innovation Program, told the Washington Examiner after the report was released.
The reading follows several months of large job gains and the lowest unemployment rates since the 1960s, which have represented key positive economic data that President Joe Biden has touted even as historic inflation cuts deeply into the paychecks of people across the country.
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The labor market recovery has so far absorbed hits without slowing down, such as mass layoffs in the tech industry and a sudden, sharp downturn in the housing market.
Fed Chairman Jerome Powell testified before both the House and the Senate this week. During his testimony, Powell struck a more hawkish tone and explained that the strong labor market coupled with hotter-than-anticipated recent inflation reports could cause rates to go higher and stay there for longer.
Inflation rose in January to a 5.4% annual rate, according to the personal consumption expenditures index, which is the gauge favored by the Fed.
Powell said the data “suggests that the ultimate level of interest rates is likely to be higher than previously anticipated. If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.”
“Restoring price stability will likely require that we maintain a restrictive stance of monetary policy for some time,” he added.
After he spoke, the odds of a larger Fed rate hike of a half-percentage point rose above 60%, according to CME Group’s FedWatch tool, which calculates the probability using futures contract prices for rates in the short-term market targeted by the Fed.
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The Fed is next scheduled to meet on March 21-22.
