WASHINGTON – A burst of hiring in February underscored the resilience and confidence of U.S. businesses, which are adding workers at the fastest pace in 17 years. Yet the strong job gains did little to raise wages last month.
U.S. employers added 295,000 jobs, the 12th straight monthly gain above 200,000, the government said Friday. And the unemployment rate fell to 5.5 percent from 5.7 percent. But the rate declined mainly because some people out of work stopped looking for jobs and were no longer counted as unemployed.
The average hourly wage rose just 3 cents to $24.78 an hour. Average hourly pay has now risen just 2 percent over the past 12 months, barely ahead of inflation.
Still, over that time, 3.3 million more Americans have gotten jobs. More jobs and lower gas prices have led many consumers to step up spending. That is boosting the economy, offsetting sluggish growth overseas and giving employers the confidence to hire.
Most analysts have forecast that the economy will grow about 3 percent this year, supporting about 250,000 job gains a month. Those increases should raise pay this year, they say.
Friday’s figures provide “more evidence that the labor market is recovering rapidly, with employment growth more than strong enough to keep the unemployment rate trending down,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics. Falling unemployment “makes more acceleration in wages increasingly likely.”
At 5.5 percent, the unemployment rate has now reached the top of the range that the Federal Reserve has said is consistent with a healthy economy. That could make it more likely that the Fed will raise interest rates from record lows as early as June.
“This is quite a symbolic change that increases the pressure on the Fed to hike rates in June,” said Paul Dales, an economist at Capital Economics.
Indeed, after the jobs report was released Friday, investors sold ultra-safe U.S. Treasurys, a sign that many anticipate a Fed rate hike. The yield on the 10-year Treasury note rose to 2.24 percent, from 2.11 percent before the report was issued.
Investors also sold stocks. The Dow Jones industrial average plummeted 261 points in morning trading.
Yet the Fed’s decision is complicated by many factors. The 5.5 percent unemployment rate doesn’t reflect as healthy a job market as it typically has in the past. One reason the rate has fallen so low is that many people have stopped looking for work. The proportion of Americans who either have a job or are seeking one dipped one-tenth of 1 percentage point in February to 62.8 percent. That is close to the lowest level in 37 years.
Economists calculate that about half of that decline reflects the aging of the population as the baby boom generation increasingly retires. But another factor is that many Americans have been discouraged by their job prospects and have given up looking.
The Fed may also be reluctant to start raising rates as long as wage growth remains weak.
Megan Greene, chief economist at John Hancock Financial Services, noted that hourly pay fell in February from January in the construction and mining industries. Greene suggested that such figures will outweigh the falling unemployment rate in Fed Chair Janet Yellen’s mind and perhaps discourage a rate increase soon.
February’s hiring gains were broad-based. Some of the industries with the biggest gains include mostly low-paid work: Hotels and restaurants added 60,000 jobs, retailers 32,000. But higher-paying fields also added jobs: Professional and business services, which include accountants, engineers and lawyers, gained 51,000, and construction 29,000 and financial services 10,000.
The U.S. job market and economy are easily outshining those of other major nations. Though Europe and Japan are showing signs of growing more than last year, their economies remain feeble. The euro currency union’s unemployment rate has started to fall, but at 11.2 percent it remains nearly twice the U.S. level.
The U.S. economy expanded at a breakneck annual pace of 4.8 percent in last year’s spring and summer, only to slow to a tepid 2.2 percent rate in the final three months of 2014. Many economists estimate that growth is picking up slightly in the current quarter to an annual rate between 2.5 percent and nearly 3 percent.
Still, economists remain bullish about hiring despite the slowdown in growth. The fourth quarter’s slowdown occurred largely because companies reduced their stockpiles of goods.
Though consumers are saving much of the cash they have from cheaper gas, spending in January still rose at a decent pace after adjusting for lower prices.
Dave Long, chief executive of Orangetheory Fitness, says the improving economy has given a boost to his fast-growing exercise studio business. He opened the first location five years ago in Fort Lauderdale, Florida. The company now has nearly 200 sites in the United States.
Steady job gains and higher incomes have made it easier for more people to sign up for memberships, Long said. The company is less dependent on wealthy consumers and willing to expand into middle-income areas, he said.
“As people have a little extra money . . . it opens up their minds to spending a little more on a product like ours,” he said.