U.S. economy added 678,000 jobs in February

The U.S. economy added 678,000 jobs in February and the unemployment rate fell to 3.8%. KPMG’s Senior Economist Ken Kim provides his analysis on the February report.

Kenneth Kim

Kenneth Kim

Senior Economist, KPMG US

+1 212-954-6144

Video transcript

KPMG Senior Economist Ken Kim provides his analysis on the February jobs report.

February’s jobs growth could be a sign of brighter days ahead

Job growth in February far surpassed economist expectations. The U.S. economy generated 678,000 news jobs, exceeding the expected 423,000 increase by more than 200,000. 

Variation by sector and industry

Services sector: With 179,000 new jobs, leisure and hospitality saw the most significant gains, as consumers and travelers were reassured by the lessening Omicron wave. There was also a firm gain of close to 100,000 jobs in healthcare (as well as the social-assistance sector), which is encouraging given the industry’s acute staffing shortages.  Most of these gains were in ambulatory and physicians’ office settings, while hospitals and nursing homes continued to struggle.

Goods-producing sector:  Construction and manufacturing, with 60,000 and 36,000 new jobs, respectively, adding 96,000 jobs in total. Solid industrial activity and a still robust housing sector continued to drive the need for workers.

At the same time, the motor vehicles and parts sector lost 18,000 jobs due to ongoing supply chain friction stemming from the semiconductor chip shortage.

The unemployment rate declined

In addition to job growth, the unemployment rate declined to 3.8% in February, down from 4.0% in January. Further, the labor force participation rate increased by 0.1% to 62.3% as more people trickled back into the labor market to find jobs.  A testament to the strong momentum of the current expansion, the U.S. economy could surpass the low unemployment rate of 3.5% seen in the previous expansion (2009-2020).

One caveat: Declining wage growth

The one area of potential concern in the February jobs report was a cooling in wage growth.  Although wages remained stable from January to February, if you look at wages on an annual basis, wage growth actually slipped .4% -- from 5.5% in January to 5.1% in February. 

The weaker wage print is likely due to the number of part-time and lower wage workers hired in February. For example, 418,000 part-time workers were added to the economy, the largest jump in this category since the start of the pandemic. 

The take-away?

While one month does not make a trend, the overall jobs report is optimistic.  Considering the 3-month and 6-month wage trends, growth is still well above the 12-month average.  Therefore, we believe that the dip in February wage growth was a temporary variance, as opposed to an indicator of a longer-term directional trend.  And if declining wage growth turns out to be more than a blip, it could help ease inflationary pressures in the economy.  In this case, we would likely see slow and steady interest rate increases by the Federal Reserve, ultimately producing a long-lasting and more durable U.S. economic expansion.