The labor market continued its strong start to 2024, with nonfarm payroll employment increasing by 275,000 in February. According to the U.S. Bureau of Labor Statistics (BLS), the unemployment rate ticked up 0.2 percentage points to 3.9%, and the number of unemployed individuals increased by 334,000 to 6.5 million.
“While today’s headline employment once again blew past expectations, downward revisions to December and January slightly dampened momentum,” says Nik Scoolis, manager, housing economics, at Zonda. “Despite these corrections, the underlying data remains solid and suggests that the labor market is growing moderately.”
As noted by Scoolis, the employment growth figures for December and January were revised from the originally reported figures. December growth was downwardly revised to 290,000 jobs from 333,000, while January growth was significantly revised to 229,000 jobs from 353,000.
The increase in the unemployment rate was the first change in the indicator since August, according to Joel Kan, vice president and deputy chief economist of the Mortgage Bankers Association (MBA).
“Last month’s gain of 275,000 jobs outpaced the 12-month average and was largely driven by service sector employment, which accounted for 204,000 jobs added,” Kan said.
In February, the average hourly earnings increased by 0.1% on a month-over-month basis and by 4.3% compared with February 2023.
“Annual wage growth slowed slightly to 4.28%, but this measure also remains above the 3% longer-run average,” added Kan. “Taken together, this labor market tightness is contributing to upward pressure on inflation, particularly in the service sectors of the economy.”
The labor force participation rate remained at 62.5% for the third consecutive month in February, while the employment-population ratio was little changed at 60.1% in the month.
The number of long-term unemployed individuals—those jobless for 27 weeks or more—was little changed at 1.2 million in February and accounted for 18.7% of all unemployed people. The number of people not in the labor force who want a job was also little changed at 5.7 million.
“The strength of the job market, along with an economy that is still growing at a moderate pace, are positives for the housing market, as it supports home purchase activity and helps borrowers to stay current mortgage payments,” said Kan. “However, the labor market’s continued resilience is one of several factors keeping mortgage rates from declining much further in the near term.”
Scoolis said the developments in the February jobs report, including the downward revisions for December and January, “should help the Fed potentially cut rates in the second half of the year.”
