The U.S. economy added a healthy 235,000 jobs in February, according to government data released Friday morning, surpassing economists’ expectations and likely clearing the way for the Federal Reserve to raise interest rates this month.
The unemployment rate ticked down to 4.7 percent, compared with 4.8 percent in January, and wages rose by 6 cents to $26.09 in February, after a 5-cent increase the month before.
“It’s definitely a solid report,” said Tara Sinclair, an economist at George Washington University. “This is the kind of number that the Federal Reserve was looking to receive before their meetings next week.”
The release of February’s unemployment data was widely seen as the final hurdle before the Federal Reserve’s March 14-15 meeting, when the central bank is expected to announce a quarter-point increase in its benchmark interest rate. The odds of a March rate increase climbed to more than 90 percent on the jobs data Friday, up from only 25 percent at the beginning of February, according to futures contracts monitored by the CME Group’s FedWatch program.
“Raising rates next week is as close to a certainty as you ever get in this business,” said Scott Clemons, chief investment strategist at Brown Brothers Harriman.
U.S. stock markets opened higher Friday, but all three major indexes had dipped slightly by mid-afternoon.
“We’re in that curious environment where the only good news is news that surpasses our already high expectations,” Clemons said. “But I’m hard pressed to find anything disappointing in this report.”
Measures of business and consumer confidence have risen in recent months, due in part to the continued long-run recovery of the economy and expectations of a more business-friendly environment under the Trump administration. In early March, Gallup’s U.S. Economic Confidence Index, a measure of how Americans rate current economic conditions, rose to the highest level in its nine-year history.
On Friday morning, Trump retweeted a tweet by Drudge Report with a link to a news story on the jobs numbers. “GREAT AGAIN: +235,000,” the tweet read.
White House press secretary Sean Spicer also appeared to claim some credit for the Trump administration. “Not a bad way to start day 50 of this Administration,” he wrote in a tweet that quoted data from the jobs report.
Not a bad way to start day 50 of this Administration https://t.co/pysL1jxLpq
— Sean Spicer (@PressSec) March 10, 2017
“The fact that hundreds of thousands more people found new jobs last month is a good sign that our economy is moving in the right direction,” Rep. Kevin Brady (R-Tex.) said in a statement. “While we still have much more work to do, I’m optimistic that the actions that President Trump and House Republicans are taking will add to this momentum — creating more jobs, growing families’ paychecks, and improving the lives of all Americans.”
Democrats took a different view. “Today’s jobs numbers make clear what we have known for some time: President Trump did not inherit a mess, in fact he inherited one of the longest expansions in American history,” Sen. Martin Heinrich (D-N.M.) said in a statement.
The February jobs report was the first to capture a snapshot of the labor market during Trump’s presidency. It was based on data collected in the week of February 12–18, when Trump had been in office for more than three weeks. During his campaign, Trump had called into question the accuracy of the Labor Department’s monthly unemployment report. Still, last month he also touted the January jobs report as a positive sign for his presidency, even though those surveys were conducted while President Barack Obama was still in office.
Trump’s ambitious pledges to slash corporate taxes, cut regulations and boost spending on infrastructure have helped push stock markets to record highs in recent weeks. Yet some economists question whether other pledges, such as a federal workforce hiring freeze, a reduction in immigration and a more combative attitude toward international trade, could ultimately weigh on growth.
Meanwhile, early legislative efforts, including repealing and replacing the Obamacare and introducing tax cuts, remain in flux, as members of Congress and White House staffers battle over the details.
The administration is already confronting the challenge of translating campaign trail promises into legislation as it prepares to issue a portion of its budget around March 16.
Economists said the strong showing in February could be due in part to a “Trump bump” but that years of steady improvement in the economy probably played a stronger role. Expectations can wield a surprising influence over the economy, able to stoke inflation and encourage consumers to spend and businesses to invest. However, Trump’s actions likely haven’t had time to concretely affect the economy yet.
“To the extent that businesses hire based on expectations of stronger demand, there is probably some linkage there,” said Mark Hamrick senior economic analyst for Bankrate.com.
Yet, ultimately, businesses don’t base hiring decisions just on sentiment, he said. “What you really need to see are rising consumer and business spending. In terms of the sentiment, we’re going to have to see follow-through on things like tax reform and infrastructure spending for all of this to be sustainable.”
Sinclair agreed that expectations of friendlier business conditions could be boosting the labor market. “But the overall employment gains are still a very long-run trend,” she said. “We have seen really consistent but slow improvement in the labor market for several years now. It takes time for that to accumulate.”
The U.S. economy has now grown for 94 straight months, the third-longest expansion on record. While growth has been somewhat slower than in previous boom times, economists emphasize how far the nation has come since the depths of the recession, including adding roughly 16 million jobs since the beginning of 2010.
The increase in hiring has also boosted paychecks. In February, average hourly wages rose 2.8 percent compared with the year before, a sign that employers are having to compete for workers by raising wages as the economy continues to heat up. Meanwhile, the labor force participation rate rose to 63 percent, as the stronger economy pulled more people into the workforce who might have previously given up looking for jobs.
Educational services, health care and mining accounted for much of the hiring last month. Rising demand from overseas markets helped push up employment in the manufacturing sector. Construction hiring surged, as unseasonably warm weather in many states allowed crews to work through February.
The Labor Department also revised its estimates for job creation in December and January, increasing the total number of jobs added to 9,000 more than previously reported.
The government report followed a separate survey published earlier in the week. The report by ADP and Moody’s Analytics showed the private sector adding 298,000 jobs in February, blowing past economists’ expectations of 189,000 jobs.
“Great news. We are only just beginning. Together we are going to #MAGA!” Trump tweeted after the release of those figures on Wednesday.
Economists have been watching Trump’s statements on the jobs figures carefully. On the campaign trail and after his election, Trump had challenged the accuracy of the official unemployment rate, calling it “phony” and a “joke” and claiming that it was actually as high as 42 percent.
At a meeting of the National Association of Business Economists in Washington last week, members were circulating a letter to Congress citing a concern that there is a lack of appreciation for government economic data and calling on policymakers to support it.
Strong economic data in recent months appears to have persuaded the Federal Reserve that it is time to lift interest rates, a change that would make borrowing a little more expensive for businesses and consumers.
The Fed has been trying to strike a balance of raising interest rates fast enough to ward off inflation, but not so rapidly as to quash improvements in the labor market. The central bank has forecast three rate increases for this year, though Yellen and others have been careful to specify that the pace of tightening will hinge on the economy’s progress.
Last Friday, Fed Chair Janet L. Yellen added her voice to a chorus of Fed governors and reserve bank presidents who had signaled in public speeches that a rate hike was likely to come this month.
“On the whole, the prospects for further moderate economic growth look encouraging,” Yellen said in a speech to the Executives’ Club of Chicago.