The Labor Market Stayed Strong in February

Despite recent high-profile layoffs, it’s clear that employers are still adding jobs — and plenty of them.

Employers added 275,000 jobs in February, down from the initial 353,000 reported by the U.S. Bureau of Labor Statistics in January, though that was revised to 229,000 in this report. As in prior months, health care, leisure and hospitality, and government drove the bulk of the gain.

Meanwhile, the 3.9 unemployment rate is the highest since January 2022 but still marks the 25th consecutive month below 4 percent — a feat that KPMG economist Yelena Maleyev calls “incredible.”

Indeed, while the Federal Reserve is looking for signs of rebalancing, the labor market is still surprisingly hot: February’s report comes in above the prior 12 months’ average monthly gain of 230,000 jobs. Wage growth, increasing 4.3 percent year-over-year, is likely still too strong for the Fed, though that’s down from a 4.5 percent year-over-year increase in January.

Inflation, meanwhile, continues to rest above the Fed’s 2 percent target with a 3.1 percent reading in January, leading Fed Chair Jerome Powell to caution that the economic outlook remains “uncertain.”

And yet, in other areas, the labor market is showing some signs of normalization. The Job Openings and Labor Turnover Survey from earlier this week changed little, as openings continued to normalize from 2022 heights.

The quits rate was also the lowest in over three years and “points to further easing in wage pressures,” says Lydia Boussour, senior economist at EY. As a result, she expects to see wage growth fall into a consistent pace with the Fed’s target “as labor demand and supply continue to rebalance in the coming months.”

In the meantime, “employers will become increasingly strategic when it comes to attracting and hiring the talent they need,” Boussour says.