Stronger than expected job gains reinforce hope of ‘soft landing’

Written by ABC AUDIO on March 9, 2024

(WASHINGTON) — U.S. job gains far exceeded expectations in February, a defiant show of strength that keeps the economy humming but signals a cooldown from the breakneck start to 2024, U.S. Bureau of Labor Statistics data on Friday showed.

The economy added 275,000 jobs last month, blowing past economist expectations of about 200,000 jobs added but marking a substantial decline from the hiring of roughly 350,000 workers in January, BLS data showed.

The unemployment rate climbed to 3.9% in February, rising from 3.7% in the month prior, according to the data.

While the job market remains hot, its easing temperature could allow the Federal Reserve to go forward with interest rate cuts expected in the coming months, some analysts told ABC News on Friday.

In other words, the fresh jobs report aligns with the central bank’s path toward a soft landing, in which inflation returns to normal levels while the economy averts a recession, they said.

A solid job market exemplifies the continued strength of the U.S. economy, since profits driven by strong demand lead to growth and additional hiring. However, excess demand risks driving up prices and rekindling inflation.

“For those worried about signs of unwelcome heat in the market after the past few months, this report is a welcome cooling breeze. And if you’re concerned about a labor market on unsteady ground, you shouldn’t be too frightened,” Nick Bunker, economic research director for North America at Indeed Hiring Lab, told ABC News in a statement.

Inflation has fallen significantly from a peak of 9.1% but it remains roughly a percentage point higher than the Fed’s target rate of 2%.

While job growth remains robust, the performance last month keeps the central bank on track for interest rate cuts this year, Mark Hamrick, senior economic analyst at Bankrate, told ABC News in a statement.

The Fed “isn’t in a hurry to cut rates, but it is setting the stage,” Hamrick said.

When weighing an interest rate cut, the Fed closely watches wage growth, since a rise in worker pay could prompt businesses to offset the added costs by raising prices.

Wages climbed 4.3% in February compared to a year ago, the BLS data on Friday showed. That rate exceeds the inflation rate of 3.1%, effectively giving the typical worker a pay bump.

However, the wage growth falls short of expectations, putting the central bank on track to achieve its goal of moderate inflation and continued economic expansion, Seema Shah, chief global strategist at Principal Asset Management, told ABC News in a statement.

“If the economy can continue to add jobs but without triggering a resurgence in wage growth, the Fed will achieve its soft landing,” Shah said.