February’s jobs report has again confirmed that the US economy is very healthy – even if inflation remains a major concern. US jobs are growing strongly, output as well and markets have accepted the looming rate rise from the Federal Reserve and then a few more.
The big imponderable is the Russian invasion of Ukraine and then the enormous rise in volatility, commodity prices and shortly, a ramp up in inflation in the US and other economies.
But the US economy is well placed to ride out the next inflationary push and rising rates.
US jobs growth jumped sharply in February, shaking off Covid Omicron and adding to the case for the Federal Reserve to follow next week’s rate rise with a couple more over the rest of 2022.
For the second month in a row the number of new jobs created – in the case of February it was 678,000 jobs – was far in excess of economists’ expectations and after 467,000 were created in January.
The market had been looking for 440,000 new jobs and the jobless rate dropped to 3.8% while economists had forecast 3.9%.
The news had no impact on Wall Street or bond yields as markets remain pre-occupied by what is happening in Ukraine and with the dislocations knocking around the world economy and financial system from the tough sanctions imposed on Russia.
The jobs data was collected in mid-February, before the Russian invasion of Ukraine, which have roiled global financial markets and caused a sharp increase in energy prices.
So no impact yet from the Russian invasion but if energy prices continue at their current high levels or rise further, then the outlook for US jobs will become clouded from the impact of the sudden surge in prices and shortages.
In a sign that the string could be going out of inflation, wages barely rose for the month, up just 1 cent an hour, or 0.03%, compared with estimates for a 0.5% gain.
The year-over-year increase was 5.13%, well below the 5.8% market estimate as more lower-wage workers were hired and 12-month comparisons helped soften the more recent gains (the monthly comparative base in 2021 is starting favour the 2022 comparison unlike last year when the comparison was being made with Covid hit 2020.
In the wake of the jobs report, inflation moves to front place in US economic debate this week with the Consumer Price Index for February being released
But unlike Australia where the number of people employed has topped the level before the pandemic in February, 2022, the US labour market is still 1.14 million short of its pre-Covid level.
Labour shortages remain a major concern with the record 10.9 million jobs that were open at the end of 2021.
The February report confirms that the surge of Covid Omicron during the northern winter had little impact (because of relatively high levels of vaccination, which is also the major reason why Australia seems to have escaped the mini pandemic relatively unscathed.
US monthly job gains have averaged more than 400,000 for 10 months in a row. That run – since May 2021 – is a record and you no longer hear the moaning of economists, business and Republicans that the Biden administration is not creating jobs.
The current streak is the longest ever and takes to around 19 million the number of jobs created in the US since April, 2020.
