The US economy added 311,000 jobs in February, exceeding expectations, with bars and restaurants contributing to the gains. The unemployment rate rose slightly to 3.6% from January’s 3.4%, which was the lowest rate in 50 years. The US Federal Reserve is working to temper the economy to alleviate inflationary pressures.
Despite the US central bank raising interest rates to their highest levels since 2007, the job market has remained strong and resilient. According to Richard Flynn, managing director at Charles Schwab UK, until the jobs reports reflect a decrease in demand within the economy, officials will likely view the inflation rate as running hot and in need of further cooling.
In January, inflation in the US was at 6.4%, which is much higher than the 2% rate considered healthy by most central banks, despite having dropped since last summer.
This week, the Federal Reserve chairman Jerome Powell cautioned that the bank may increase its benchmark rate at a faster and higher rate than anticipated due to concerns that progress in controlling prices was slowing down.
Powell pointed to the robust job market as one of the factors fueling inflationary pressures. The addition of 311,000 jobs in February followed a surge of hiring in January, which took many economists by surprise.
According to the latest report from the US Labor Department, the tight labor market has resulted in a 4.6% increase in average hourly pay in February compared to a year earlier.
Despite this, there is a high risk of the US economy slowing sharply and entering a recession due to rising living costs and higher interest rates.
However, Justin Wolfers, professor of public policy and economics at the University of Michigan, believes fears of a painful downturn are overblown.
He sees the job gains reported for February as a sign that the economy is in good shape and likely to remain so, despite the Fed’s moves to raise interest rates.