Job growth beats estimates, unemployment rate hits 2-year high

• The US unemployment rate was 3.9% in February, according to the Bureau of Labor Statistics.
• The release out Friday also showed there were 275,000 jobs added, larger than the forecast.

February's job growth was strong and similar to January's revised job gain.

According to Friday's news release from the Bureau of Labor Statistics, the US experienced job growth of 275,000 in February. That was above the forecast of 198,000. That also was larger than January's revised growth of 229,000. January's prior estimate was 353,000, as noted in the news release published in February.

"This is exactly the progress that we want to see," Acting Secretary of Labor Julie Su told Business Insider. "And exactly the definition of stable, strong economic growth."

Additionally, December's job growth of 333,000 stated in the February release was updated to 290,000 in the new report.

Leisure and hospitality saw large job growth in February, with an increase of 58,000.

"Employment in food services and drinking places increased by 42,000 in February, after changing little over the prior 3 months," the latest news release from BLS stated.

Government employment also increased by 52,000. Manufacturing and wholesale trade experienced a decline in their employment levels.

"I think that the labor market is still quite resilient, but it is cooling and slackening," Julia Pollak, the chief economist at ZipRecruiter, said. "I think that these figures may even overstate the strength of the labor market and definitely overstate the breadth of job gains because of changing seasonal patterns in employment in America since the pandemic."

Pollak also pointed out the large job gains seen in December and January were revised downward and an increase in the unemployment rate in February.

The unemployment rate ticked up from 3.7% in January to 3.9% in February, per Friday's news release. This rate was expected to come in at 3.7%.

"We know that increases in the unemployment rate can snowball quite quickly and turn into bigger increases," Pollak said, adding "that when people lose their jobs, they pull back on spending, businesses see their revenue decline and cut jobs more."

"So I think that's definitely something to keep watching — both business perceptions of consumer spending and actual hard data on consumer spending as well as this unemployment rate," Pollak added.

The labor force participation rate remained at 62.5% in February, which was also the rate a year prior. The employment-to-population ratio also fell from 60.2% to 60.1%.

Additionally, the new data release noted average hourly earnings increased 4.3% from February 2023 to this past February. Year-over-year wage growth has been pretty similar in recent months, with most of the recent year-over-year increases in average hourly earnings being around 4.3%. Additionally, average hourly earnings increased from $34.52 in January to $34.57 in February.

"I think this is a labor market that's sort of returned to some familiar trends," Nick Bunker, Indeed Hiring Lab economic research director for North America, told BI. "One where job gains are strong but not as robust as a couple years ago, but strong enough to keep the labor market pretty strong."

Bunker added that despite the increase in the unemployment rate in February, it could end up being what was seen last year "where it rose but then came back down."

The Bureau of Labor Statistics also reported on job openings and other data for January earlier this week. Job openings fell by 26,000 from December's level to 8.9 million in January. The number of hires also ended up falling, dropping from around 5.8 million to 5.7 million. The number of quits declined as well, and the quits rate ticked down from 2.2% in December to 2.1% this past January. That's also way below the most recent high of 3.0% in April 2022.

"The once high-flying quits rate continues to fall and is now below its pre-pandemic level, which could signal both that workers that found good opportunities over the past few years and are happy to stay in their new role, and that workers are feeling less confident about their prospects for finding a new job," Bunker said in written commentary earlier this week.

Amid the data seen this week, job seekers and workers "should still feel generally positive," Bunker told BI.

"If you have a job right now, you're in a good position when it comes to job security," Bunker said. "That layoff rates are very low, moves from having a job to unemployment were still quite low in this report as well. Now, if you are someone who has a job, is looking to switch jobs or wants to switch jobs right now, it's going to be tougher than the past."