US employment gains surged in February, the clearest sign yet of labor market strength that could further ease fears the economy was heading into recession and allow the Federal Reserve to gradually raise interest rates this year.
Nonfarm payrolls increased by 242,000 jobs last month, the Labor Department said on Friday. The unemployment rate held at an eight-year low of 4.9% even as more people piled into the labor market.
“This is the best news the Fed could have expected going into the meeting. With jobs bouncing back, you can be sure that rate hikes are just around the corner,” said to Reuters, Chris Rupkey, chief economist at MUFG Union Bank in New York.
The economy added 30,000 more jobs in December and January than previously reported. The only blemish in the report was a three-cent drop in average hourly earnings, but that was mostly because of a calendar quirk. The average length of the workweek also fell last month.
Economists had forecast employment increasing by 190,000 last month and the jobless rate holding steady.
The employment report added to data such as consumer and business spending in suggesting the economy had regained momentum after growth slowed to a 1.0% annual rate in the fourth quarter. Growth estimates for the first quarter are around a 2.5% rate.
Fears of a recession in the wake of poor economic reports in December and slowing growth in China sparked a global stock market rout at the start of the year, causing financial market conditions to tighten.
Financial markets have priced out bets of a rate rise at the Fed’s March 15-16 policy meeting and see a roughly 50% chance of a hike at the September and November meetings, according to CME FedWatch. Economists, however, believe the strong jobs market and improved growth outlook, together with signs that inflation is creeping up, could prompt the Fed to lift borrowing costs in June.
The Fed raised its key overnight interest rate in December for the first time in nearly a decade.
