Jobs Report Was No Fairy Tale

Monthly manufacturing production nudged down to 0.1pc

The world's largest economy added 313,000 jobs last month, the strongest gain since July 2016, according to the employment report from the Bureau of Labor Statistics.

The U.S. added a hefty 313,000 jobs in February - the biggest increase in 1 1/2 years - while wages rose more modestly than the previous month.

The unemployment rate was unchanged and remain low at 4.1 percent in February.

The Labor Department outlined the gains in its February jobs report, which showed employment rose in the US sectors of construction, retail, professional and business services, manufacturing, financial activities and mining.

Last month average hourly earnings for all employees on private nonfarm payrolls increased by a meager $0.04 to $26.75, after a 7-cent uptick in January. But January's figure was revised one-tenth of a point lower to 2.8 percent.

January's initial estimated wage gain - showing the biggest increase since the recession ended - had stoked concerns in financial markets that bigger than expected paychecks would lead to higher inflation and cause the Fed to shift its plan toward more aggressive rate increases. Payrolls in January were revised to 239,000 from 200,000.

More modest wage growth cools fears about inflation and rising U.S. interest rates, both of which spooked the markets last month.

"The strong job growth assures at least three interest rates hikes by the Federal Reserve in 2018", said Yun.

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Labor force participation has been on the decline for years in the USA labor market, and February's increase shows there is still slack remaining in the labor market to draw in workers who were left behind after the financial crisis.

In 2017, the USA economy added 259,000 jobs in January and 200,000 jobs in February.

Wall Street reacted positively to the job numbers, with stocks up almost 1 percent this morning.

"In a nutshell, the tax cuts are already boosting hiring, but as long as it's not causing wages to accelerate or the unemployment rate to drop, why worry?"

Markets likely will react badly to a further rise in wage growth, especially if pay gains reach 3%, according to Jim Paulsen, chief investment strategist at The Leuthold Group.

Combine the late survey week with a month that had just 28 days, and the third Friday after the reference week - jobs day - happens to be the second Friday of the next month.

The US labour market continued to strengthen in February, but wage pressures eased. The Trade Partnership, a consulting firm, estimates that the tariffs could eliminate roughly 145,000 jobs.

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