The Labor Department reported that the U.S. economy added 678,000 jobs in February which was above expectations of 444,000 jobs added. Notably, hiring was strong across all industries. This report also cements that the Federal Reserve will be hiking at its next meeting given that it dismisses any concern of an imminent slowdown.
Another silver lining of the report is that wage growth came in at 5.1% which is a slight deceleration and could be an indication of more people entering the labor force. This would be positive in helping businesses that are desperate for workers and also provide some relief for inflationary pressures.
Going into the jobs report, the stock market was trading about 1.5% lower. Initially, the market rebounded as the result was a "Goldilocks" number in that it indicates a stronger economy without necessarily indicating more inflation. However, the market quickly gave up these gains and is mostly lower as it focuses on the Russia-Ukraine conflict.
Overall, the unemployment rate dropped to 3.8% from 4%. It was also the biggest jobs number in 7 months and a welcome sign of acceleration especially as the pandemic seems to be nearing an end. There were also positive revisions for previous months. Another tailwind is the removal of restrictions and full reopening which is happening across the country.
About 25% of new jobs were in leisure and hospitality which were the industries most affected and still have the biggest gaps from pre-pandemic levels - about 98,000. Restaurants added 124,000 new jobs last month and hotels hired 28,000 people.
Notably, no industries reported a decline in employment. The labor force participation rate increased to 62.3% which remains off the pre-pandemic level - a gap of about 3 million workers.
Following the jobs report, there was strength in industries that do better with more employment like staffing firms and health insurance companies. However, we are now in an environment where good economic news is bad as it increases the chances of a rate hike.
This jobs report does that but it wasn't inflationary in that it could steepen the Fed's trajectory. Instead, there was the outside chance that a real bad number could force the Fed to hold off on its hike.