The U.S. economy added another round of stronger job increases last month, the Labor Department said Friday, adding further evidence to the Federal Reserve's concerns that the red-hot labor market will continue to stoke inflation pressures.
However, a softer-reading on wage gains, which came in below Street forecasts, suggested some of the pressures could be easing amid a surge in tech and industrial layoffs and the increased recession risk seen for the domestic economy.
The Bureau for Labor Statistics said 311,000 new jobs were created last month, blasting the Street consensus forecast of a 205,000 gain. Private payrolls were up 265,000, the BLS said, again topping Street forecasts as the unemployment rate bumped to 3.6%.
The BLS also revised its January jobs addition estimate only modestly, to 504,000 from its original estimate of a 517,000 net gain, while lowering its December estimate to 239,000 from its prior estimate of 260,000.
The BLS noted that hourly wages were up 0.2% on the month - the slowest since February of last year and down from the 0.3% gains recorded over January and December. The tally was also inside Street forecasts of a 0.3% gain. On a year-on-year basis, wages were up 4.6%, compared to the 4.4% pace recorded in January, the BLS said, and the Street forecast of 4.5%.
“It is encouraging to see another strong jobs report amid recession concerns and ongoing layoffs. We are hopeful that the continued strength of the jobs market and signs of slowing inflation will ease market volatility in the coming months," said Steve Rick, Chief Economist at CUNA Mutual Group in Madison, Wisconsin. "We expect the unemployment rate to remain below the natural rate of 4.5% in 2023. Still, we will continue to pay particular attention to factors that could impact the jobs market, such as further interest rate hikes, inflation, supply chain disruptions and geopolitical issues.”
U.S. stocks pared earlier declines following the data release, with the Dow Jones Industrial Average rising 105 points by late morning and the S&P 500 rising 6 points.
Benchmark 10-year Treasury note yields fell 19 basis points from yesterday's levels to 3.735% while 2-year notes fell another 17 basis points to 4.704% amid an extended flight to safely linked to the crisis at tech start-up lending SVB Financial (SIVB).
The U.S. dollar index, which tracks the greenback against a basket of its global peers, was marked 0.54% lower at 104.740.
The CME Group's FedWatch suggests a 47% chance of a 50 basis point rate hike on March 22, down from around 80% earlier this week after Federal Reserve Chairman Jerome teed-up bigger rate hikes during his two-day testimony before Congress.
"Overall, despite the strong headline number, this was a report that suggests the labor market continues to soften, which is good news for rates, and probably is soft enough to keep the Fed at a 25 basis point increase at the next meeting - depending on the results of the next CPI report," said Brad McMillan, CIO for Commonwealth Financial Network in Waltham, Mass.
