On March 8, 2024, the U.S. Bureau of Labor Statistics (BLS) released its February employment report, revealing a surprise gain of 275,000 jobs, well above the consensus estimate of approximately 200,000. This robust expansion reflects continued resilience in the labor market despite persistent inflation and rising interest rates.
The unemployment rate edged up to 3.9%, its highest level since January 2022, a result of increased labor participation and downward revisions to prior months’ data. Revisions show prior job gains were overstated—December was trimmed by 43,000 jobs and January by 124,000—lowering combined gains by 167,000.
Job growth in February was broad-based. The healthcare sector led with 67,000 jobs, surpassing its 12-month monthly average of 58,000. Government employment rose by 52,000, largely in local and federal agencies, mirroring its normal pace. The food services and drinking places category added 42,000 jobs, rebounding after little change in prior months.
Other notable contributors included social assistance with 24,000 jobs, construction with 23,000, transportation and warehousing with 20,000, and retail trade with 19,000. Industries such as manufacturing, wholesale, information, financial activities, and professional services saw little change.
Despite the uptick in employment, wage growth cooled. Average hourly earnings rose just 0.1% in February—equating to five cents per hour—bringing the year-over-year increase to 4.3%. The average workweek expanded slightly, to 34.3 hours. This deceleration in wage growth, alongside upward movement in unemployment, suggests cooling pressures on inflation.
The mixed signals in the report have important implications for monetary policy. Strong payroll growth typically supports risk for inflation and could encourage the Federal Reserve to maintain tight policy. However, the tempered wage growth and slight rise in unemployment may reassure policymakers that the labor market is easing without destabilizing the economy.
Investors responded cautiously. Equity markets showed modest declines: the S&P 500 declined 0.7%, Nasdaq fell 1.2%, and the Dow Jones dipped 0.2%. These moves reflect investor uncertainty around how the Fed might respond—noting that the labor market is neither overheating nor crashing.
In his post-release comments, Federal Reserve Chair Jerome Powell underscored the importance of labor and wage trends in shaping future interest rate decisions. He noted that while further rate hikes may not be on the immediate horizon, the central bank will remain data-dependent, seeking confirmation of declining inflation before moving toward easing.
The household survey showed a divergence from payroll gains: employment per that measure fell, contributing to the rise in the unemployment rate. This discrepancy—common during periods of adjustment—highlights that both strong payrolls and softening household employment readings are consistent with a labor market gradually rebalancing.
Going forward, economists project slower job growth, estimating monthly gains will likely hover around 200,000. If wage growth remains moderate and unemployment continues a gradual rise, pressure on the Fed to hold rates should ease, potentially opening the door to initial cuts by June or July, though many Fed officials argue for caution.
February’s jobs report offers a nuanced narrative. Robust hiring—275,000 new positions—confirms labor market durability. Yet the uptick in unemployment and deceleration in wages suggest it’s cooling. For the Fed, this report confirms progress toward a balanced setup: a labor market strong enough to avoid recession but not so overheated that inflation expectations surge. Monetary policy likely remains on pause, awaiting firmer signs of declining inflation.
