US Hourly Earnings Fail to Keep Pace with Inflation for the 23rd Consecutive Month
Average hourly earnings failed to keep pace with inflation for the 23rd consecutive month in February, with wages rising to 4.6% from 4.4% in January, year-over-year. The data comes as part of the latest jobs report, which showed that the US economy added 311,000 jobs last month, well above the expected 205,000.
US Economy Added 311K Jobs in February, Smashing Expectations
The latest jobs data exceeded expectations once again. According to the Labor Department report, the US economy added 311,000 jobs in February, smashing the economists’ expectations of 205,000 jobs. The unemployment rate rose by 0.2% to 3.6%, also above the consensus projections of 3.4%.
“The unemployment rate is up 0.2% to 3.6%, higher than forecast. Contributing to upward pressure here, there were more people looking for work.”– said Mark Hamrick, senior economic analyst at Bankrate
Average hourly earnings in the US rose by 4.6% year-over-year in February, marking the 23rd straight month where inflation exceeded wage growth annually. Month-on-month, average hourly earnings increased by 0.2% in February after climbing 0.3% a month earlier.
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Higher Chances of a Higher Interest Rate Hike
While the latest jobs data marks a notable pullback from the whopping 504,000 positions added in January, it still shows that the US labor market remains red hot. Economists said that myriad factors, such as warmer-than-expected weather and annual benchmark revisions to the data, fueled the blockbuster job growth in January.
The US labor market, one of the sources of record high inflation, showed its resilience again despite the Federal Reserve’s efforts to slow the economy through a series of jumbo interest rate hikes over the past year. The US central bank delivered two 25 basis points (bps) rate hikes in 2023, marking a more dovish approach than last year’s tightening.
But Fed Chairman Jerome Powell told Congress earlier this week that the bank would likely need to switch back to bigger rate hikes. Before the latest jobs data, financial markets had priced in a 50 bps rate increase at the upcoming Fed policy meeting on March 21 and 22.
Since March 2022, the Fed has raised its policy rate from near zero to 4.50%-4.75%. All factors suggest that the Fed will raise the funding rate beyond 5% this month as strong labor market and wage growth continue to fuel inflation and economic expansion.
Do you think a 50 bps rate hike is almost guaranteed following the new jobs data? Let us know in the comments below.