US economy adds 313,000 jobs in strong monthly display but wage growth slows

The US added 313,000 new jobs in February – the strongest gain since July 2016 – as the unemployment rate remained steady at 4.1%.

The figures from the labor department smashed the 200,000 forecast from economists. But the recovery in wages, which sparked a sell-off on global stock markets, stalled again last month.

Wages have lagged behind the growth in employment since the last recession. In February, average hourly earnings rose just 0.1% a month earlier, below economists’ projections of 0.2% and January’s 0.3% rise.

The US jobs market has now added an average of 242,000 jobs each month over the past three months. But the still slow growth in wages implies that while people who were on the margins are returning to work, the jobs being created are still lower wage.

Daniel Alpert, managing partner at Westwood Capital and a senior fellow in financial macroeconomics at Cornell Law School said it was a question of math. “We have had an enormous degradation in the quality of jobs in the last 25 years and have become far more dependent, especially since the recession, on low-wage, low-hour jobs. And these jobs really don’t pay very much at all.”

“From 1997 to 2017 we lost 5 million manufacturing jobs now we are adding them back at the rate of tens of thousands. It would take forever to add them back and we never will,” he said. As a result jobs growth is now too heavily dependent on low wage growth, he said. “There’s only so many ways to flip a hamburger.”

Growth in construction and retail added to February’s strong numbers with construction adding 61,000 and retail 50,000. Employment in professional and business services increased by 50,000 in February, and has risen by 495,000 over the year.

In January, wages picked up at a rate unseen since 2009. The news led to a sell-off on stock markets as investors bet that the Federal Reserve would move more quickly to raise rates. But the closely watched number dipped in February, with wages up 2.6% over the year, down from January’s 2.9% growth.

“The massive 313,000 increase in non-farm payrolls in February, the biggest in 18 months, together with the 54,000 upward revision to gains in the preceding two months, illustrates that the economy is doing much better than the recent incoming activity data have suggested,” said Paul Ashworth, chief US economist at Capital Economics.

“This is more evidence that the Fed will need to hike four times this year, starting later this month.”