US wage growth accelerated in February, while job growth continued apace, bolstering the case for a Federal Reserve rate rise next week.
Average hourly earnings climbed by 2.8 per cent on a year-on-year basis in the first full month of Donald Trump’s presidency, according to data from the labour deparment. The reading matched Wall Street’s expectations and marked an improvement from the 2.6 per cent notched in the previous month.
The economy tacked on 235,000 jobs during the month, compared with forecasts of 200,000. Meanwhile, the jobless rate dipped to 4.7 per cent from 4.8 per cent. The broader underemployment rate fell by 0.2 percentage points to 9.2 per cent.
February’s reading on the labour market has taken on increased significance after a chorus of senior Fed officials have indicated in recent weeks that the world’s largest developed economy is likely strong enough to withstand higher interest rates.
Fed chair Janet Yellen said last Friday that a March rate increase would likely be “appropriate” given the upbeat economic data released in recent weeks.
“A March hike is a done deal,” said Luke Bartholomew, investment manager at Aberdeen Asset Management. “The report was the last piece in the puzzle and there is nothing here that will make the Fed want to step back from their recent signalling,”
Echoing that sentiment, PNC economist Gus Faucher said that “the labour market is where the FOMC wants it to be, with solid job growth, declining labor market slack, accelerating wage growth, and inflation heading toward the FOMC’s 2 per cent target.”
Manufacturers added jobs for the third-straight month in February, bringing the net job gain over the period to 57,000. The sector had shed 62,000 jobs in the previous 10 months as factories faced a sharp downturn in demand from the energy industry.
“We see the modest turnaround in manufacturing employment as likely to be sustained and continue to expect a moderate manufacturing expansion this year,” said Rob Martin, an economist at Barclays.
Construction employment was also strong, rising by 58,000 in February —the biggest gain since March 2007. Mr Martin said the figure was boosted by “unseasonably warm weather”, but that the mild winter may soften construction hiring in April and May as “the typical seasonal pattern resumes”.
Treasury prices ticked slightly lower after the report, with the 10-year yield at 2.602 per cent. It had crossed the 2.6 per cent line on Thursday for the first time since mid-December.
US stock-index futures increased on the heels of the data. S&P 500 futures climbed by 0.5 per cent to 2,374.5 and Dow Jones Industrial Average futures increased by the same margin to 20,925.