ArcaMax

The economy continues to add jobs and defy expectations.

In February, there were 275,000 new jobs, but the two previous months were revised lower, by 167,000. That means that the originally reported robust results in December and January look a little less strong than previously thought.

Still, average monthly job creation has been about 250,000 for the past 14 months, a solid showing.

The unemployment rate edged up to 3.9 percent, as more people entered the labor force. Anything under 4% is low, but we are at the highest level in two-years (January 2022).

Additionally, average annual wages were up by 4.3%, a slight downshift from the previous month, but a marked drop from the recent peak of 5.9% in March 2022.

Add in the fact that the quits rate has dropped back to its pre-pandemic level, and you might wonder whether something is lurking in the distance...is the labor market turning over or is it in transition from red-hot to lukewarm?

Jeffrey Roach, chief economist for LPL Financial, believes the latter. “Firms will likely slow the pace of hiring in the coming months and shrink payrolls as indicated in the recent layoff announcements,” but that doesn’t mean that a jobs recession is afoot. Amid the transition, some firms are keeping staff, but reducing hours worked, a form of “labor hoarding” according to Roach.

Where does this leave the Fed, as the March Federal Open Market Committee rapidly approaches?

Fed Chair Jerome Powell says that rates are unlikely to go any higher from current levels and that the central bank will begin to cut them this year.

But before they can pull the trigger, Powell told Congress that officials need “to see a little bit more data” in order to become confident that high inflation rates are really behind us. Most investors believe that the first cut will likely occur at the June meeting.

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