US job gains accelerate in February as unemployment rate dips

Economy added 678,000 jobs last month while wage growth slowed, showing a strong labour market

The US economy added 678,000 jobs in February while the unemployment rate dipped to 3.8 per cent. AP

US hiring boomed in February while wage growth slowed, showing a strong labour market that is likely to keep the Federal Reserve on track to raise interest rates this month while offering some respite from strong inflationary pressures.

Nonfarm payrolls increased 678,000 last month after an upwardly revised 481,000 gain in January, a Labour Department report showed on Friday. The advance was broad-based across sectors. The unemployment rate edged down to 3.8 per cent, and average hourly earnings were little changed from the prior month.

"Today’s report shows that my plan to build an economy from the bottom up and the middle out is working to get America back to work," US President Joe Biden said in a statement.

The median estimate in a Bloomberg survey of economists called for a 423,000 advance in payrolls and for the unemployment rate to fall to 3.9 per cent.

The employment report — the last the Fed will receive before its March 15-16 meeting — highlights a steadily improving, though extremely tight labour market.

While declining Covid-19 cases and looser restrictions likely helped boost hiring, employers are still scrambling to fill a near-record number of vacancies, making it tough to meet resilient demand by households and businesses alike.

"While we must tackle head on the challenge families are facing with rising costs, today’s report underscores that the United States is uniquely well positioned to deal with the challenge that inflation has posed across the world as we recover from the pandemic," Mr Biden said.

Labour demand is likely to continue to exceed supply, limiting the pace of job growth and putting upward pressure on wages.

Friday’s report showed average hourly earnings were little changed in February and up 5.1 per cent from a year ago, a deceleration from the prior month.

Speaking to US Congress on Capitol Hill this week, Fed Chairman Jerome Powell backed a quarter-point interest rate increase this month. Global banks are expecting several interest rate increases this year.

Mr Powell indicated that the central bank has achieved its maximum employment goal in current conditions, as Fed officials are tackling the highest US inflation in 40 years.

The central bank would be “prepared to move more aggressively” if inflation does not subside as fast as expected, he said.

Bloomberg contributed to this report