The economy added 313,000 new jobs and unemployment held at 4.1 percent in February, the Bureau of Labor Statistics said Friday in an encouraging report.
February’s job growth was the strongest of any month since July 2016, easily beating forecasters’ expectations for around 205,000 new jobs.
Even as the jobs recovery ages toward an eighth year, it has remained more than strong enough to keep the unemployment rate trending down.
Job creation has averaged 242,000 over the past three months, when counting upward revisions to the past two months’ numbers. That average is more than twice the 90,000 to 120,000 jobs a month the Federal Reserve calculates are necessary to keep up with population growth.
The Trump administration has pledged drive down unemployment even further and draw more people into the workforce by infrastructure spending and welfare reforms to its tax cuts and spending increases, all toward the goal of raising workers’ wages.
“We think there is plenty of room for this economy to continue to grow,” White House legislative director Marc Short said on CNBC.
Wage growth was the one disappointing aspect of Friday’s report. Average hourly earnings grew at a 2.6 percent annual rate, down from a strong 2.9 percent clip the month before and closer in line with the tepid wage gains of the past few years.
The lack of wage pressure “shows the economy can expand and heat up a lot more, and give the workers the opportunity to enjoy the expansion,” said Robert Frick, corporate economist with Navy Federal Credit Union, who noted that wage growth has been much stronger at the same point in previous recoveries. “It would be a shame for the Fed to get too aggressive in raising rates, and choke off or slow down that expansion before workers get a chance to participate in the economy growth.”
In recent weeks, the Fed has been debating just how low the unemployment rate can go. From the central bank’s point of view, it would be safe to maintain low interest rates for longer if there are many people outside the official labor force who would take jobs if wage and salary offerings rose significantly. If there aren’t, though, the Fed would be better off tightening monetary policy now to avoid sending inflation above its 2 percent target.
This week, Fed governor Lael Brainard suggested that it was an “open question” how many working-age people might be tempted back into the labor force if the Fed were to allow the unemployment rate to keep dropping.
Recent history suggests that there could be many. For more than four years now, labor force participation has remained mostly steady, suggesting that the falling unemployment rate is enticing more people into the job hunt. Given the ongoing retirement of the Baby Boomers, workforce participation would be expected to fall.
On Friday, the survey of households indicated that labor force participation grew strongly in February to the highest rate since early 2014, at 63 percent.
And total employment for people in their prime working years, ages 25 to 54, reached 79.3 percent of the population, the highest such ratio since mid-2008.
In short, the latest figures conflict with claims that the country is at “full employment.” At full employment, it would be expected that job gains would peter out and wage increases would start accelerating quickly. The opposite has been the case.
There are signs, though, that labor markets are tight in some industries and regions. For instance, Home Depot announced Thursday that it will donate $50 million to train 20,000 construction workers over the next decade, in the hopes of alleviating shortages in that industry.
Builders created 61,000 new jobs in February and 185,000 jobs in the past four months.
The retail sector and support services also showed strong employment growth in the month.
Manufacturing continued on its hot streak, with 31,000 new workers. Over the past year, manufacturing employment has grown by 224,000.
