U.S. Added 313,000 Jobs in February. Here's What That Means.

By Patricia Cohen

Whether you work on Wall Street or in a warehouse, behind a cash register or on a construction site, the jobs report released by the government on Friday offered some good news. 

A winning combination of hefty job creation and a swelling work force signaled the economy's fundamental strength. At the same time, modest wage growth defused concerns that competition for workers was driving up salaries and igniting inflation.

In all, the nation added 313,000 jobs in February, the most since July 2016, with impressive gains across low-, middle- and high-wage industries.

For the fifth month in a row, the jobless rate remained unchanged at 4.1 percent, a 17-year low. And hundreds of thousands of people streamed into the job market, confounding analysts who have insisted that the pool of potential workers has been depleted.

"I love it," said Ellen Zentner, chief United States economist at Morgan Stanley. "We were able to create enough jobs to accommodate new seekers and keep the unemployment rate steady."

And on Twitter, President Trump relayed the news in capital letters: "JOBS, JOBS, JOBS!"

For workers, the modest 0.1 percent rise in average hourly earnings was disappointing. Since October, year-over-year wage growth had been shooting up at a much faster monthly rate compared with the characteristic plodding increases that have whittled down the standard of living for millions of low- and middle-income Americans.

Some of those gains were reversed in February, leaving the 12-month average at 2.6 percent, higher than last year's average, but still below what many economists think a tight job market should yield.

For Wall Street, the overall report was a dream.

The sizable jump in average hourly earnings in January was widely cited as causing a market sell-off last month over speculation that the Federal Reserve might raise rates more aggressively than it has planned. That could put a damper on lending, hiring and business expansion.

Instead, the report seems to keep the Fed on course for three increases of a quarter-point in the benchmark interest rate this year, starting when it meets this month for the first time under its new chairman, Jerome H. Powell.

"A strong jobs report with less wage inflation tells the market that current concern about the wage issue is overblown," said Jonathan Golub, chief United States equity strategist at Credit Suisse. "The market has to think that is terrific."

Stocks were up strongly in Friday's trading after the report was released.

R. Alexander Acosta, the labor secretary, credited the recent tax bill for continuing to "boost economic confidence."

Mr. Golub, however, doubted the tax cuts should get much credit for this report, noting that the synchronized global recovery has been strong since the middle of 2016. 

Other administration policies could make February's report particularly significant, however. With Mr. Trump's move to put tariffs on steel and aluminum imports and growing talk of a trade war, last month's numbers could establish a baseline to measure the impact of trade restrictions and retaliation over the coming months. Manufacturing job gains, for example, totaled 31,000, more than twice the January figure.

"We need to hire 300 people in the next 90 days," said Brian Krenke, president of KI, an employee-owned furniture maker based in Green Bay, Wis. "It's different from years ago, when people were lining up for jobs."

The company employs roughly 2,800 workers in its six factories. Mr. Krenke said he was looking for both entry-level and skilled workers, aggressively recruiting people graduating from high school and technical colleges. "It's stressful," he said, because "other companies are all doing the same things."

Just as businesses focus on the customer experience, Mr. Krenke said employers must pay more attention to the worker experience. "We want them to walk away from the interview saying this is really an organization we want to work for," he said. "You really need to be much more flexible and accommodating these days."

In some sectors, the competition for workers has become fierce.

Diane Swonk, chief economist for the accounting firm Grant Thornton, said she had heard reports of trucking companies paying drivers six-figure salaries, plus $20,000 signing bonuses to lure them from competitors. Companies are also offering to train new drivers - even though many end up being poached by other companies.

"For years and years, the trucking companies said they couldn't find drivers, but they wouldn't raise wages," Ms. Swonk said. "Well, now they are."

The construction industry is also booming. Employers added 61,000 jobs last month - a hefty number for the off-season - bringing four-month total gains to 185,000.

Jed Kolko, chief economist at Indeed, an online recruiting site, noticed a significant increase in construction job postings over the past week without a corresponding response from applicants.

The mismatch could grow significantly under Mr. Trump's plan to encourage local, state and private investment in infrastructure. "If there is public interest in infrastructure, where do workers come from?" Mr. Kolko asked. "Does that end up bidding up construction wages and competing with other kinds of construction activity already underway?"

The monthly report from the Labor Department provides only a snapshot of the economy. February's figures will be revised up or down twice more, and January's once more.

Nonetheless, job growth has been consistently strong in recent months. The labor force participation rate climbed back to the 63 percent mark, and the unemployment rate for blacks fell to 6.9 percent after popping up in January.

Amid the optimistic reactions, however, a persistent lack of employment among large numbers of working-age men continues to haunt the economy.

Although large economic differences across regions have always been a characteristic of the United States, that gap appears to be widening. The Harvard University economists Benjamin Austin, Edward Glaeser and Lawrence H. Summers argue that the disparities are sharp among three regions: the prosperous coasts; the Western heartland, with its natural resources and higher education levels; and the Eastern heartland, which extends roughly from Mississippi to Michigan.

That area is suffering from a glut of social and economic ills, including joblessness, disability, opioid-related deaths and rising mortality, they said.

"The income and employment gaps between three regions are not converging, but instead seem to be hardening," they write in a paper published in the latest edition of the Brookings Papers on Economic Activity. "America appears to be evolving into durable islands of wealth and poverty."

Rather than moving to higher-income areas to take advantage of employement opportunities, people remain stranded in areas that are economic dead ends. Among the reasons are rising housing costs and the difficulty of transferring assistance like Medicaid across state lines. That's why a national shortage of workers does not necessarily translate into jobs for harder-to-employ people.

Outside of these depressed pockets, though, the economy is plowing forward. 

"Despite the slowdown in the year-over-year wage number, this was an incredibly strong jobs report with widespread benefits," Mr. Kolko said. "Two of the most important household surveys were at their best level in almost 10 years," he added, referring to a drop in the number of people who have been unemployed for more than half a year, and an increase in the proportion of prime-age workers (25 to 54 years old) in the labor force. 

"Today was remarkable," he added. "It's really hard to find any bad news."

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