The U.S. Economy Added Over 300,000 Jobs in February

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What happened

In February, the U.S. economy added 311,000 jobs, reported the Bureau of Labor Statistics. That national unemployment rate, which previously sat at 3.4%, ticked upward slightly to 3.6%, which is comparable to where the jobless rate was before the COVID-19 pandemic.

So what

In January, the U.S. economy added more than 500,000 new jobs, so by contrast, February's numbers seem far more moderate. But February's job gains also exceeded economists' expectations, as they anticipated job growth closer to the 200,000 range. And that's an indication that the job market as a whole is pretty strong.

"Some of these sectors, especially services, are still recovering from the pandemic," said Eugenio Alemán, chief economist at the financial services firm Raymond James. "I think that puts the thought of a recession kind of in doubt."

Now what

From a broad economic standpoint, February's jobs report is actually a bit of a mixed bag. Continued job growth should lend confidence to the idea that a near-term recession isn't so likely. But we live in an age where strong economic data always seems to have a negative slant. That's because the Federal Reserve wants to see weak points in the economy, as those could point to a slowdown in inflation.

The Fed has been on a mission to cool rampant inflation since early last year. And while the annual rate of inflation was 6.4% in January compared to 9.1% the June before, the Fed has made it clear, on repeated occasions, that it's looking for inflation to creep back toward the 2% mark. Until that happens, the central bank is likely to keep raising interest rates, making it more expensive for consumers to take out loans, finance cars, and carry credit card balances.

Now the fact that job growth wasn't nearly as intense in February compared to January could lead the Fed to calm down a bit in the context of interest rate hikes, and perhaps implement a more modest increase during its next meeting. On the other hand, February's jobs numbers may be just strong enough to fuel a more aggressive rate hike, which would only burden cash-strapped consumers needing to borrow money.

All told, a bigger driver of the Fed's next rate hike decision is apt to be February's Consumer Price Index (CPI), which won't be released until next week. If February's inflation readings come in higher than expected, that, combined with a pretty positive jobs report, is likely to lead to more aggressive rate hikes in the near term. But if the CPI shows a cooling of inflation, consumers may only see a small rate hike when the Fed next sits down.

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