The U.S. economy continued to add new jobs in February, as the unemployment rate ticked up to 3.6%.
Data from the U.S. Bureau of Labor Statistics for February 2023 showed the following:
The economy added 311,000 new jobs, driven by gains in leisure and hospitality, retail trade, government, and health care.
Retail trade added 50,000 jobs in the month, driven by employment gains at general merchandise stores of 39,000.
Unemployment edged up to 3.6%.
Average hourly earnings rose by 8 cents, or 0.2%, to $33.09.
What it means for brands and retailers: In short, jobs are a key indicator of consumer demand, and they remain robust.
While the number of new jobs added was slightly below the 6-month average of 343,000 and January’s whopping gains of 504,000, the data provides another indication that the job market remains hot. Unemployment remains at historic lows, and has changed little over the last year despite ticking up slightly this month. Wages are still increasing, as well.
Overall, the jobs report keeps the narrative about the consumer picture the same: A healthy labor market is providing fuel to keep consumers spending, even as concerns about higher prices from inflation continue.What it means: In short, jobs are a key indicator of consumer demand, and they remain robust.
What it means for the Fed: This report could also influence how the Federal Reserve moves on interest rates, which are being hiked to bring inflation down and have the side effect of cooling demand.
The jobs report underscores the dual nature of any economic news at a time when high prices are continuing to put pressure on the economy as a whole. Economists are particularly concerned about data that showed consumer spending was up in January and global manufacturing output picked up in February. Put that together with the strong jobs report, and there are concerns that inflation will remain too hot, and the Fed will have no choice but to keep tightening to bring it down.
“Normally, a strong jobs report would be cause for celebration, but it can be hard to distinguish between ‘bad’ and ‘good’ economic news right now," said Joel Beal, CEO and CPG analyst at Alloy.ai. "Interest rate expectations are currently driving everything, so good economic numbers only increase the likelihood of higher interest rates, which escalates pessimism about future growth.”
In testimony before Congress this week, Chairman Jerome Powell said the central bank may consider returning to a faster rate increase of 0.5% after slowing down to 0.25% in February.
“The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated,” Mr. Powell said before the Senate Banking Committee on Wednesday. “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.”
Another hot jobs report could bolster that case, but Powell said no final decision has yet been made.
In the bigger picture, Powell has suggested that it may be possible to bring down inflation without seeing unemployment rise. We'll get more data on whether that scenario is playing out when the government releases the latest Consumer Price Index next week.
