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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.
Trending in Economy
Labor disputes on the West Coast could cause further disruption heading into peak season.
When the first half of 2023 is complete, imports are expected to dip 22% below last year.
That’s according to new data from the Global Port Tracker, which is compiled monthly by the National Retail Federation and Hackett Associates.
The decline has been building over the entire year, as imports dipped in the winter. With the spring, volume started to rebound. In April, the major ports handled 1.78 million Twenty-Foot Equivalent Units. That was an increase of 9.6% from March. Still it was a decline of 21.3% year over year – reflecting the record cargo hauled in over the spike in consumer demand of 2021 and the inventory glut 2022.
In 2023, consumer spending is remaining resilient with in a strong job market, despite the collision of inflation and interest rates. The economy remains different from pre-pandemic days, but shipping volumes are beginning to once again resemble the time before COVID-19.
“Economists and shipping lines increasingly wonder why the decline in container import demand is so much at odds with continuous growth in consumer demand,” said Hackett Associates Founder Ben Hackett, in a statement. “Import container shipments have returned the pre-pandemic levels seen in 2019 and appear likely to stay there for a while.”
Retailers and logistics professionals alike are looking to the second half of the year for a potential upswing. Peak shipping season occurs in the summer, which is in preparation for peak shopping season over the holidays.
Yet disruption could occur on the West Coast if labor issues can’t be settled. This week, ports from Los Angeles to Seattle reported closures and slowdowns as ongoing union disputes boil over, CNBC reported. NRF called on the Biden administration to intervene.
“Cargo volume is lower than last year but retailers are entering the busiest shipping season of the year bringing in holiday merchandise. The last thing retailers and other shippers need is ongoing disruption at the ports,” aid NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said. “If labor and management can’t reach agreement and operate smoothly and efficiently, retailers will have no choice but to continue to take their cargo to East Coast and Gulf Coast gateways. We continue to urge the administration to step in and help the parties reach an agreement and end the disruptions so operations can return to normal. We’ve had enough unavoidable supply chain issues the past two years. This is not the time for one that can be avoided.”